1.

Which of the following events changes the total size of the monetary base?

A.

All of these statements are true

B.

USABank gets into solvency problems and receives an emergency loan from the Fed at the discount window

C.

USABank settles its customers' transactions with customers at other banks

D.

A customer of USABank withdraws 100 USD at an ATM and keeps it in cash

2.

Consider an economy that is initially in its long-run equilibrium. Suppose this economy experiences a positive aggregate demand shock. What can a central bank achieve through changing short-term interest rates?

A.

All of these statements are correct

B.

The central bank can bring back both output and inflation back to their original level, through an increase in aggregate supply

C.

The central bank can bring inflation back to its original level, but only at the cost of lower output in the short run

D.

The central bank can bring back both output and inflation back to their original level, through a reduction in aggregate demand

3.

Consider the market for reserves, and suppose that the supply curve currently intersects the demand curve in the downward-sloping section of the demand curve. What happens to the federal funds rate if the Fed increases the interest rate it pays on reserves?

A.

If the increase in the interest rate on reserves is small, the federal funds rate will increase

B.

If the increase in the interest rate on reserves is large, the federal funds rate will increase

C.

The federal funds rate will definitely increase

D.

The federal funds rate will definitely decrease