Question

1. In order to speed up the monetary policy effects, there should be a combo of tools used, which are:

a) buying bonds and increasing the discount rate

b)buying bonds and increasing the RRR

c)Increasing the RRR and selling bonds

d) Increasing both the RRR and the discount rate

e) Decreasing the discount rate while increasing the RRR

2. Which of these are not a way that banks can increase reserves to meet the RRR?

a) call in loans

b)borrow from different banks

c)borrowing from the fed using the discount rate

d)create more money by printing

e) discontinuing loans

3. Depict a graph that shows AD/AS analysis of the long run effects of expansionary policy.

4. Depict a graph that shows AD/AS analysis of the short run effects of expansionary policy.

Answer 1

Question 1

The speeding up of the monetary policy effects implies that the administration of either the contractionary or the expansionary monetary policy.

Contractionary monetary policy includes the following tools -

1. Selling of bonds

2. Increasing RRR

3. Increasing discount rate

Expansionary monetary policy includes the following tools -

1. Buying of bonds

2. Decreasing RRR

3. Decreasing discount rate

So,

The correct combo to be used is increasing both the RRR and the discount rate.

Hence, the correct answer is the option (d).

Question 2

The bank can meet the RRR by increasing reserves in the following ways -

1. By calling in loans

2. By borrowing from different banks

3. By borrowing from the Fed using the discount rate

4. By discontinuing loans

However, the banks do not have power to print money.

So,

The correct answer is the option (d).