How to solve economic question?

Posted on 2014-12-11 05:53:00 in Economics by DAVIN

Q 1. When the Fed decreases the reserve requirement, it:

A. expands the money supply because banks have more to lend.
B. expands the money supply because banks have less to lend.
C. contracts the money supply because banks have more to lend.
D. contracts the money supply because banks have less to lend.

Q 2. When the Fed lowers the discount rate, this sends a signal to banks that:

A. the Fed is about to raise the prime rate.
B. the Fed is about to lower the prime rate.
C. the Fed wants the money supply tightened.
D. the Fed wants the money supply expanded.

Q 3. If the reserve ratio is 20%, the simple money multiplier will be equal to:

A. 2
B. 5
C. 10
D. 20

Q 4. An open market sale of government securities by the Fed has a tendency to:

A. shift the supply curve for bonds to the left, increase the price of bonds and the interest rate.
B. shift the supply curve for bonds to the left, increase the price of bonds and decrease the interest rates.
C. shift the supply curve for bonds to the right, decrease the price of bonds and increase the interest rates.
D. shift the supply curve for bonds to the right, decrease the price of bonds and the interest rate.

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