Question: When the central bank decides it will sell bonds using open market operations

Answer: the money supply decreases

Question: When the central bank decides to increase the discount rate, the interest rates

Answer: increase

Question: Atlantic Bank is required to hold 10% of deposits as reserves. if the central bank increases the discount rate, how would atlantic bank respond?

Answer: by increasing its reserves

Question: _____ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect

Answer: long and variable time lags

Question: Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession?

Answer: quantitative easing

Question: The central bank uses a _____ monetary policy to offset business related economic contractions and expansions

Answer: countercyclical

Question: Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?

Answer: reserve requirements

Question: If the economy is in recession with high unemployment and output below potential GDP, then _____ would cause the economy to return to its potential GDP

Answer: loose monetary policy

Question: If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely by?

Answer: fighting inflation

Question: THe _____ is the institution designed to control the quantity of money in the economy and also to oversee the

Answer: Central bank; safety and stability of the banking system