Question Details

Monetizing the debt means that the Federal Reserve is not seeking buyers for all the government 



1. "If I ask a worker to get me a spare part for my car, he'll refuse to do it for money, but will do it for vodka." This phenomenon is happening in Russia because of a very high 
a) tax rate b) inflation rate c) alcoholism rate d) unemployment rate 
2. "Monetizing the debt means that the Federal Reserve is not seeking buyers for all the government bonds, but is _________. This, essentially, means that the Federal Reserve is ..........." Fill in the blank and complete this clipping. 47 
a) buying them itself; printing money b) buying them itself; shrinking the money supply 
c) selling them to the commercial banks; printing money 
d) selling them to the commercial banks; shrinking the money supply 
Suppose that the central bank buys $4 billion of bonds on the open market and the banks wish to hold reserves of 8 percent. 
3. What is the largest amount the money supply could ultimately increase? 
a) $4b b) $32b c) $50b d) $80b 
4. What would the money multiplier be in this case? 
a) 4 or less b) more than 4 but not more than 8 
c) more than 8 but not more than 12 d) more than 12 
5. If when extra deposits are created customers increase their holdings of cash by 3 percent of those extra deposits, the money multiplier 
a) is unaffected b) becomes larger 
c) becomes smaller d) can't tell what should happen




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