Question Details

A sale of bonds by the central bank should cause 



1. As interest rates rise the demand for money 
a) rises because bond prices fall b) falls because people want more liquid assets 
c) rises because the rate of return to loaning money is greater 
d) falls because the opportunity cost of holding money is higher 
2. Which of the following causes M1 demand to decrease? 
a) a fall in the tax rate b) an increase in income 
c) a fall in the interest rate d) an increase in the use of credit cards 
3. The near-term effect of an unexpected sale of bonds by the central bank is 
a) an increase in interest rates, a rise in investment and a rise in GDP 
b) an increase in interest rates, a drop in investment and a drop in GDP 
c) a decrease in interest rates, a rise in investment and a rise in GDP 
d) a decrease in interest rates, a drop in investment and a drop in GDP 
4. A sale of bonds by the central bank should cause 
a) a fall in the interest rate b) an increase in the money supply 
c) a decrease in the reserves of the commercial banks 
d) an increase in the commercial banks' loans to the public 
5. The correct ordering of the intermediate steps of the chain of causation from a change in central bank policy to a change in GDP is the central bank 
a) sells bonds, lowers price of bonds, increases i rate, decreases aggDg&s 
b) sells bonds, lowers price of bonds, decreases i rate, increases aggDg&s 
c) buys bonds, increases price of bonds, increases i rate, increases aggDg&s 66 
d) buys bonds, increases price of bonds, decreases i rate, decreases aggDg&s



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