Monetary Policy Clicker Questions

[#1]

If the Fed buys Treasury bills from a commercial bank:

A) bank reserves increase, money supply decreases

B) bank reserves increase, money supply increases

C) bank reserves decrease, money supply decreases

D) bank reserves decrease, money supply increases

If the Fed buys Treasury bills from a commercial bank:

A) the equilibrium interest rate increases

B) the Federal Funds rate increases

C) the equilibrium interest rate decreases

D) the reserve ratio decreases

E) none of the above

To fight a recession, the Fed could:

A) increase the Federal Funds rate

B) lower the reserve ratio

C) sell treasury bills to banks

D) reduce taxes

E) increase the inflation rate

The money multiplier is _____ related to the spending multiplier:

A) positively

B) inversely

C) not

D) directly

[Discussion starter] True or false: The Federal Reserve controls the money multiplier.