If a Central Bank wished to increase the supply of money it should
(a) Raise the reserve requirement.
(b) Raise the rate of discount.
(c) Buy government bonds in the money market.
(d) Do any or all of the above.
Answer: (c) Buy government bonds in the money market.
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If the government removes a binding price floor from a market, then the price paid by buyers will
a. increase, and the quantity exchanged will increase. b. increase, and the quantity exchanged will decrease. c. decrease, and the quantity exchanged will increase. d. decrease, and the quantity exchanged will decrease.
An excess demand in a market implies that
a. the amount demanded is less than the amount supplied b. price is greater than the equilibrium price c. a shortage of the good exists d. a surplus of the good exists e. the government must implement a price ceiling