1. A Restrictive monetary policy by the Fed must lead to:
A. A decrease in investment and an increase in aggregate demand.
B. Leave investment unchanged but decrease aggregate demand.
C. An increase in investment and an increase in aggregate demand.
D. A decrease in investment and a decrease in aggregate demand.
2. When the Federal Reserve uses open market operations (OMO) in an expansionary monetary policy:
A. the Fed will lower taxes and increase government spending.
B. the Fed will purchase stocks from banks, increasing the monetary base.
C. the Fed will decrease the discount rate, decreasing the monetary base.
D. the Fed will buy bonds from banks, increasing bank reserves and increasing the monetary base.
3. A primary goal of monetary policy is to:
A. Maintain high interest rates.
B. Prevent high rates of inflation.
C. Reduce the size of the banking sector.
D. Eliminate trade barriers from other nations.
4. The major tools of monetary policy available to the Federal Reserve System involve:
A. Reserve requirements and tax policy.
B. The exchange rates and discount rate.
C. Reserve requirements and open-market operations.
D. Open-market operations and changing government spending.