If the demand for money increases and the Fed wants interest rates to remain unchanged, which of the following would be appropriate policy?
A. Recall Federal Reserve notes from circulation.
B. Buy bonds in the open market.
C. Raise the discount rate.
D. Raise the legal reserve requirement.
Answer: B
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In the late 1970s and early 1980s, the velocity of money increased significantly. The main reason(s) for the increase was:
A. the introduction of stock and bond mutual funds with draft writing privileges and low nominal interest rates. B. high nominal interest rates. C. the introduction of stock and bond mutual funds with draft writing privileges along with high nominal interest rates. D. as presidential election years near the velocity of money increases.
The largest portion of federal government revenues comes from
A. social insurance payroll taxes. B. corporate income taxes. C. the individual income tax. D. excise taxes.