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Questions and Answers
An increase in the money supply decreases the interest rate in the short run.
An increase in the money supply decreases the interest rate in the short run.
- False
- True (correct)
- It depends on the level of government debt
- It depends on the type of monetary policy
An increase in interest rates implies a higher opportunity cost of holding money.
An increase in interest rates implies a higher opportunity cost of holding money.
- It depends on the level of inflation
- False
- It depends on the level of government spending
- True (correct)
If the Fed buys bonds in the open market, the money supply decreases.
If the Fed buys bonds in the open market, the money supply decreases.
- It depends on the level of government intervention
- False (correct)
- True
- It depends on the level of consumer spending
The money multiplier equals 1/(1 - R), where R represents the reserve ratio.
The money multiplier equals 1/(1 - R), where R represents the reserve ratio.
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Monetary policy becomes ineffective as interest rate reaches zero.
Monetary policy becomes ineffective as interest rate reaches zero.
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