When the fed sells an asset to the private sector the

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Nature of Mathematics
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Chapter 11 / Exercise 29
Nature of Mathematics
Smith
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7. When the Fed sells an asset to the private sector, the monetary base declines. 8. When a bank orders currency from the Fed, the monetary base does not change.
(F) 9. A significant move by the Fed toward a “tight” money policy is likely to enhance exports. 10. Housing investment is sensitive to changes in interest rates.
(T) 11. Decreasing interest rates increase financial wealth and encourage consumer spending. (F) 12. An increase in the money supply should ultimately cause security prices to decrease. (T) 13. Restrictive monetary policy in the United States may slow down net exports and GNP. 14. Monetarists think changing the money supply impacts economic units directly rather than
just through interest rates. (F) 15. Increasing interest rates increase wealth of spending limits and encourage spending. (F) 16. Easy monetary policy strengthens the dollar. (T) 17. A prolonged “tight” monetary policy can be associated with falling bond prices. (F) 18. Stable employment is one of the objectives of monetary policy. (F) 19. There is definitely a tradeoff between stable prices and full employment.
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Nature of Mathematics
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Chapter 11 / Exercise 29
Nature of Mathematics
Smith
Expert Verified
(T) 21. An increase in Federal Reserve float increases the monetary base. (T) 22. Cash drains decrease the monetary base, but not the money supply. (F) 23. The Fed exclusively controls the money supply.
28. When the Fed increases the Fed Funds Rate, financial institutions “go to the Window”.
(T) 31. “Cash drains” are an example of a “technical factor”.
(T) 32. Reserve requirements are not useful for “fine tuning.” (F) 33. The Fed is powerless against “technical factors”. (F) 34. High stock prices are a goal of monetary policy.
MULTIPLE-CHOICE QUESTIONS (c) 1. The monetary base will decrease when: a. banks withdraw currency from the Fed. b. the Fed makes loans at the discount window. c. the Fed sells securities on the open market. d. the Fed buys securities on the open market.
19 (a)

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