Please only answer if you are 100% certain on all questions, can explain them al
ID: 1156463 • Letter: P
Question
Please only answer if you are 100% certain on all questions, can explain them all thoroughly, and are a master in Macroeconomics.
1) Which of the following is true?
a) The negative relationship between the FFR and the price of treasury bills is a result of a change in the demand of treasury bills.
b) The price of treasury bills is likely to increase in the time of inflation because the Fed increases the demand of treasury bills.
c) The price of treasury bills is likely to decrease in the time of inflation as a result of an increase in the supply of treasury bills.
d) a and b.
e) a and c.
1.1) Which of the following is correct?
a) The Fed can precisely target the money supply but not the interest rate.
b) The Fed can precisely target the interest rate but not the money supply.
c) The Fed can precisely target the money supply but not the supply of reserves.
d) The Fed can precisely target the supply of reserves but not the money supply.
e) b and d.
1.2) Which of the following is true?
a) To tackle recession, the Fed buys treasury bills, thereby increases the money supply.
b) To tackle recession the Fed purchases treasury bills, thereby increases the reserves.
c) To tackle inflation the Fed buys treasury bills, thereby decreases the interest rate.
d) a and b.
e) a, b, c.
1.3) Which of the following is true?
a) The money multiplier is easily calculated by the Fed.
b) Monetary policy is usually not successful because the government cannot control its expenditures.
c) Monetary policy can no longer fix the economy because the Fed cannot precisely calculate the money multiplier.
d) None of the above.
2) Bank regulations
a) Are not necessary because the financial sector works more efficiently without government supervision.
b) Are designed partly to ensure the safety of depositors.
c) Are designed partly to minimize run on banks.
d) Are designed mainly to control the money supply.
e) b and c.
f) b,c,d.
3) Which of the following is true?
a) The negative relationship between the FFR and the price of treasury bills is a result of a change in the supply of treasury bills.
b) The price of treasury bills is likely to increase in the time of recession because the Fed increases the demand of treasury bills.
c) The price of treasury bills is likely to decrease in the time of recession as a result of a decrease in the Federal Funds Rate.
d) a and b.
e) a and c.
Explanation / Answer
Ans 1)
We know that Federal Fund rate and Price of Bonds are inversely related as FFR increases Price of Bond decreases hence demand for such bonds increases
In Inflation fed buys bills to increase money supply in the market which increae the price of bonds
hence option A and B are correct
that is option B is correct
Ans 1.1)
Option b)
The fed can target interest rate not the money supply because many factors other than interest rate impact money supply
Ans 1.2)
All are correct hence option E is correct response
Ans 1.3)
Option C is correct response
Ans 2)
Option B & C are correct
HEnce choose option E
Ans 3)
Option D is correct (Same question 1)