14 - Monetary policy: ( )A) is the use of tax increases or...

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Monetary policy: ( ) A) is the use of tax increases or cuts designed to change the amount of money available for spending. ( ) B) is the use of audits to make certain that banks follow bank policy. (X) C) is the use of money and credit controls to influence macroeconomic activity. ( ) D) exists only in textbooks and has no applicability to the "real world." Feedback: Monetary policy is the use of money and credit controls to influence macroeconomic activity. If an economy were to switch from a monetary system to a barter system: (X) A) it would have no effect on overall economic activity since individuals could still trade. ( ) B) economic activity would greatly diminish, causing a substantial reduction in average incomes. ( ) C) it would represent a substantial improvement in economic activity since money creates a necessity for triangular trade. ( ) D) it would represent a substantial increase in economic activity since it is well known that "the love of money is the root of all evil." Feedback: A switch to a barter system would be very inefficient and difficult to implement, resulting in lower economic activity and incomes. The Board of Governors of the Fed: ( ) A) is an advisory group consisting of 7 state governors who represent the views of individual states in monetary
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policy. ( ) B) consists of seven members appointed by the President of the United States who together act as the key decision-making entity for monetary policy. ( ) C) is an advisory group consisting of 13 large commercial bank CEO's who represent the interests of the private banking sector in monetary policy. (X) D) is the primary monetary group responsible for buying and selling bonds designed to change reserves in the banking system. Feedback: The Board of Governors is the key decision maker for monetary policy. When there is an increase in the reserve requirement: (X) A) there is typically a resulting decrease in the money supply. ( ) B) there is typically a resulting increase in the money supply since banks have more required reserves to work with. ( ) C) there is also an increase in the money multiplier. ( ) D) it generally reflects a desire by monetary authorities to stimulate the economy. Feedback: An increase in the reserve requirement will lead to a decrease in the money supply. Open market operations:
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This note was uploaded on 03/07/2012 for the course BUSN 1000 taught by Professor Web during the Spring '12 term at Webster.

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14 - Monetary policy: ( )A) is the use of tax increases or...

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