Question

1- Which of the following is a monetary policy response to the coronavirus pandemic?

I. reducing interest rates on loans to banks.

II. Providing $1,200 to American's making $75,000 or less.

III. making direct loans to primary dealers of government bonds. Providing $1,200 to American's making $75,000 or less.

a- III only.

b- II and III only.

c- I, II, and III.

d- I and III only.

e- I and II only.

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2- Which of the following is a monetary policy response to the coronavirus pandemic?

I. reducing interest rates on loans to banks.

II. making direct loans to businesses.

III. Providing $1,200 to American's making $75,000 or less.

a- II and III only.

b- III only.

c- I and II only.

d- I, II, and III.

Answer 1

1. The correct answer is d. I and III only.

This is because monetary policy deals with the interest rates and credit creation (giving loans)only. Since in case of Coronavirus, we need to boost the economic activity, we will follow the expansionary monetary policy.

Providing cash transfers by the government (as is shown in II) forms part of the fiscal policy of the government.

2. The correct answer here is I and II.

The same logic as the 1st question implies here. Reducing interest rates and creating credit (loans) forms part of konetray policy.

Financial assistance by the government forms part of the fiscal policy.