Answer the following statements true (T) or false (F)
1. When the Fed sells government securities in the open market, its intent is to try to increase aggregate demand.
2. An expansionary monetary policy increases the money supply, lowers interest rates, and increases aggregate demand.
3. If the monetary authority wishes to rein in inflation, it would buy government securities in the open market.
4. In order to stimulate the economy and reduce unemployment, the Fed will set a lower target for the federal funds rate.
5. In the cause-effect chain of monetary policy an autonomous increase in investment spending when the economy is at full employment will cause the Fed to seek a lower target for the federal funds rate by buying securities in the open market.
1. False
2. True
3. False
4. True
5. False
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The growth of the Eurodollar market is due to the ________ spreads offered by ________
A) narrower, Eurobanks B) narrower, governments C) narrower, domestic banks D) Both A and B
The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.