Question

QUESTION 16

1. Scenario B:

   The economy is growing rapidly – in fact, many economists believe it is in danger of experiencing shortages of skilled labor and key industrial inputs, such as steel and petroleum.

   Question:

   In which direction would you change each monetary policy tool in order to help the economy? Would you increase or decrease the Required Reserve Ratio?

   	a.	Increase
   	b.	Decrease

QUESTION 17

1. Scenario B:

   The economy is growing rapidly – in fact, many economists believe it is in danger of experiencing shortages of skilled labor and key industrial inputs, such as steel and petroleum.

   Question:

   In which direction would you change each monetary policy tool in order to help the economy? Would you increase or decrease the Discount Rate?

   	a.	Increase
   	b.	Decrease

  

QUESTION 18

1. Scenario B:

   The economy is growing rapidly – in fact, many economists believe it is in danger of experiencing shortages of skilled labor and key industrial inputs, such as steel and petroleum.

   Question:

   In which direction would you change each monetary policy tool in order to help the economy? For open market operations, would you buy bonds or sell bonds?

   	a.	Buy Bonds
   	b.	Sell Bonds

QUESTION 19

1. Scenario B:

   The economy is growing rapidly – in fact, many economists believe it is in danger of experiencing shortages of skilled labor and key industrial inputs, such as steel and petroleum.

   Question:

   What is the desired effect of each proposed policy in terms of changing Aggregate Demand (AD)?

   	a.	Increase AD
   	b.	Decrease AD
   	c.	Leave AD unchanged

QUESTION 20

1. Scenario B:

   The economy is growing rapidly – in fact, many economists believe it is in danger of experiencing shortages of skilled labor and key industrial inputs, such as steel and petroleum.

   Question:

   Are the proposed policies contractionary or expansionary?

   	a.	Contractionary
   	b.	Expansionary

Answer 1

Q16. Option b. In order to promote growth the required reserve ratio needs to be reduced so that the money supply increases

Q17. Option b. By reducing the discount rate, the lending rate reduces which promotes growth as the money supply increases

Q18. Option a. By buying bonds, the money supply increases which promotes growth

Q19. Option a. With the increase in AD, the supply increases which promotes growth

Q20. Option b. As all of them are trying to increase the growth