Davidson; Management - 3rd Australasian Edition



1.
The monetary base will decrease when:
A.
banks withdraw currency from the Fed.
B.
the Reserve Bank of Australia makes loans at the discount window.
C.
the Reserve Bank of Australia sells securities on the open market.
D.
the Reserve Bank of Australia buys securities on the open market.


2.
Deposits tend to expand whenever:
A.
reserve requirements decrease.
B.
the public holds more cash.
C.
reserve requirements increase.
D.
monetary policy “tightens”.


3.
Ordinarily the money supply will decrease if:
A.
the Reserve Bank of Australia makes fewer loans at its discount window.
B.
the Reserve Bank of Australia sells securities on the open market.
C.
the Reserve Bank of Australia raises reserve requirements.
D.
all of the above.


4.
The money supply
A.
is exclusively controlled by the Reserve Bank of Australia)
B.
is smaller than the monetary base
C.
excludes any interest-bearing deposits
D.
none of the above.


5.
Consumption spending should increase if
A.
financial wealth decreases.
B.
reserve requirements decrease.
C.
interest rates increase.
D.
credit availability decreases.


6.
A decrease in the monetary base is related to
A.
decrease in credit availability.
B.
increasing interest rates.
C.
decreased investment.
D.
all of the above


7.
A decrease in reserve requirements will definitely cause
A.
expenditures to fall.
B.
inflation expectations to fall.
C.
an increase in the Fed Funds rate.
D.
excess reserves to increase.


8.
An expansion in the Australian money supply
A.
will increase domestic interest rates
B.
will cause the exchange value of the dollar to increase.
C.
will cause Australian exports to increase.
D.
will cause Australian imports to increase.


9.
An contraction in the Australian money supply should
A.
increase domestic interest rates
B.
cause the exchange value of the dollar to increase.
C.
cause Australian exports to decrease.
D.
all of the above.


10.
Changes in spending caused by changing security values are called the
A.
liquidity effect
B.
wealth effect
C.
income effect
D.
reactionary effect


11.
Monetarists believe that an increase in the money supply, all else equal, will cause:
A.
consumption expenditures to rise.
B.
investment spending to fall.
C.
national income to fall.
D.
government expenditures to rise.


12.
M3 includes
A.
currency in circulation
B.
demand deposits
C.
both
D.
neither


13.
The “tools” of monetary policy, whether “viable” or not, include all the following except
A.
changing the discount rate.
B.
open market operations.
C.
changes in reserve requirements.
D.
changes in the Federal Funds rate.


14.
Which of the following would most likely decrease the Federal Funds rate?
A.
decrease in the discount rate.
B.
sale of securities by the Fed.
C.
decrease in reserve requirements.
D.
none of the above


15.
Influence of monetary policy on the real sector is
A.
negligible
B.
decisive
C.
significant
D.
insignificant


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