Question 1

Which of the following actions by the Federal Reserve would most likely increase the money supply in the economy?

Accepted Answer

Buying government bonds in the open market

Question 2

If the Federal Reserve decreases the reserve requirement, what is the expected effect on the money supply?

Accepted Answer

The money supply will increase

Question 3

Suppose the Federal Reserve increases the discount rate. What is the most likely impact on the money supply?

Accepted Answer

Money supply will decrease

Question 4

Which of the following best describes the effect of the Federal Reserve selling government bonds?

Accepted Answer

It decreases the money supply

Question 5

If the Federal Reserve wants to decrease the money supply, which policy should it implement?

Accepted Answer

Sell government bonds

Question 6

What is the relationship between the reserve requirement and the money supply?

Accepted Answer

They are inversely proportional

Question 7

Which of the following would most likely lead to a decrease in the money supply?

Accepted Answer

FED sells bonds

Question 8

If the Federal Reserve lowers the discount rate, what is the expected effect on the money supply?

Accepted Answer

Money supply increases

Question 9

Which of the following is NOT a tool used by the Federal Reserve to shift the money supply?

Accepted Answer

Changing income tax rates

Question 10

If the Federal Reserve increases the reserve requirement, what happens to the money supply?

Accepted Answer

Money supply decreases

Macroeconomics Study Notes: GDP, Unemployment, Economic Growth, and Monetary Policy

Study Guide - Practice Questions