1)

Initially, the Central Bank sets the equilibrium interest rate at 8% at which money supply is equal to money demand. Suppose now the Central Bank starts to sell government bonds to the public. What would happen to the interest rate?

a.It creates an excessive demand for bonds and the interest rate should increase

b.It creates an excessive supply of money and the interest rate should fall

c.It creates an excessive demand for money and the interest rate should increase

d.It creates an excessive supply of bonds and the interest rate should fall

e.All of the answers here are incorrect

2)

Which of the following best the assets of a commercial bank?

a) Reserves + checkable deposits + loans

b) Bonds + checkable deposits + currency in circulation

c) loans + bonds + reserves

d) Reserves + currency in circulation

e) bonds + currency in circulation + reserves