9 If the rate of required reserves is 02 then a A 2 percent

9) If the rate of required reserves is 0.2, then

a) A 2 percent increase in the interest rate increases the money supply by 4 percent.

b) A 2 percent increase in the interest rate decreases the money supply by 4 percent.

c) A 1 dollar increase in the reserves increases the money supply by 5 dollars.

d) A 1 dollar increase in the money supply increases the reserves by 5 dollars.

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.

Solution

9. The correct answer is C.

10. The correct answer is E.

11. The correct answer is E.