Question

2006, interest rates increased from 5% to 7%, when this happens consumers are A. less likely to save, that is, sell a financial asset. B. more likely to save, that is, sell a financial asset. C. less likely to save, that is, purchase a financial asset. D. more likely to save, that is, purchase a financial asset. I. In 2. If commercial banks hold all their assets in the form of required reserves: A. only they will be able to create money B. only the central bank will be able to create money. C. no one will be able to create moncy D. both commercial banks and the central bank will be able to create money. 3. In 2016, stock prices in the U.S. were rising around 13 percent per year and the interest rate in th was 2 percent. Since the expectation of further appreciation of the stock market continued good financial strategy at that time could be to A. borrow money and sell as many stocks as one could B. lend money and sell as many stocks as one could C. borrow money and buy as many stocks as one could. D. lend money and buy as many stocks as one could during the year, a 4.Which of the following options could cause a reduction in the Federal funds rate A. open market sale of govenment securities B. increase in the reserve requirement. C. increase in the discount rate. D. increase in the excess reserves of the banking system. s. On June 30, 2004 the Federal Reserve boosted its target for the Federal funds rate for the first time in four years, increasing it from a 46-year low of 1% to 1.25%. By June 2007 the Federal funds rate increased to 5%. During the period 2004-2007, the Federal Reserve: A. bought U.S. government securities, thereby creating and supplying additional Federal funds. old U.S. government securities, thereby contracting funds to the Federal funds market. C. speeded up the clearing of checks to make more funds available to banks. D. e ncouraged banks to loan out funds to ease their reserve requirements and thus lower the demand for Federal funds 6. Contractionary monetary policy by the Fed is appropriate A. when saving is less than investment B. when saving is greater than investment. C. when saving equals investment D. whatever the level of saving and investment 7. In the equation of exchange, if the velocity of money is constant, a 10 percent increase in the money suppl

Answer 1

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1.

Correct option: (D) more likely to save, that is purchase a financial asset

Reason: With higher interest rates, consumers would want to save more and earn higher interest income. In order to do this, they will purchase financial assets like government treasury bills, certificates etc. which give them interest.