Question

We cannot say an expectation is rational if ________?

the expectation is different from what the Fed expects.

only some people have this expectation.

not all the information is used to form the expectation.

the expectation ends up to be wrong.

What kind of monetary policy can be used to reduce the rate of inflation?

Selling bonds

Lowering the interest rate

Any expansionary monetary policy would work.

None of the above would work.

Suppose we hold money velocity constant, which of the following statements is true according to the quantity theory of money?

If the Fed doubles money supply, nominal GDP doubles.

If the economy produces more goods and services, money supply automatically increases.

If the economy produces more goods and services, the price level automatically increases.

If the Fed doubles money supply, real GDP doubles.

To reduce unemployment, which of the following monetary policy action could be effective in the short run?

Increase reserve requirement

Decrease interest rate

Decrease money supply

Selling bonds

Answer 1