If the Fed decreases the required reserve ratio at a time when banks are holding no excess reserves, the Fed is:
a. forcing banks to increase the money supply.
b. forcing banks to decrease the money supply.
c. making it possible for banks to increase the money supply but not forcing them to do so.
d. making it possible for banks to decrease the money supply but not forcing them to do so.
e. conducting open market operations but not changing the money supply.
QUESTION 2The smaller the marginal propensity to save, other things constant, _____.
a. the smaller the marginal propensity to consume
b. the larger the multiplier
c. the smaller the multiplier
d. the flatter the consumption function
e. the steeper the saving function
QUESTION 3Effluent taxes are the most common approach used to control pollutants in the United States.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4Open market operations involve:
a. opening the discount window.
b. buying stocks in the stock market.
c. buying and selling government securities in the open market.
d. opening new markets for commodities.
e. selling failed banks to other banks.
QUESTION 5If the marginal propensity to save (MPS) is 0.25, the simple multiplier is _____.
a. 25
b. 75
c. 5
d. 3/4
e. 4
QUESTION 6Emission permits allow producers to pollute a specified amount.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 7Which of the following statements is correct?
a. To control the money supply, the Fed relies primarily on the reserve requirement.
b. The discount rate is the rate of interest banks charge to their best customers.
c. The Fed changes the reserve requirement frequently.
d. Because the Fed has no way to earn income, it is dependent upon Congress for appropriations.
e. Banks can turn a borrower's IOU into money.
QUESTION 8If the simple spending multiplier is 8, the marginal propensity to consume is _____.
a. 1/8
b. 1/4
c. 4/5
d. 7/8
e. 8
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