10 Which of the following is NOT an example of expansionary

10) Which of the following is NOT an example of expansionary monetary policy?

a) A reduction in the rate of required reserves.

b) Buying treasury bills.

c) Lending to banks.

d) Decreasing the interest rate.

e) All are examples of expansionary monetary policy.

11) Which of the following is an example of contractionary monetary policy?

a) Increasing capital gains taxes.

b) Decreasing the budget for national defense.

c) Buying treasury bills.

d) a and b.

e) None of the above.

12) The money multiplier

a) Cannot be precisely determined because private banks may choose to keep more reserves

than what is mandatory by the rate of required reserves.

b) Cannot be precisely determined because private banks may choose to keep less reserves than

what is mandatory by the rate of required reserves.

c) Can be precisely determined because the Fed can precisely target the interest rate.

d) None of the above

Solution

a) \"E\"

All are the example of an expansionary monetary policy.

b) \"B\"

Decreasing the budget of defense will decrease the expenditure done by the government. it is an example of a contractionary fiscal policy.

c) \"C\"

The fed can target the interest rate and influence the money multiplier in the market.