1.Quantitative easing involves which of the following?

• The use of open-market operations to increase the quantity of reserves held by the commercial banks
• The use of open-market operations to increase the quantity of reserves held by the Fed
• The reduction of reserves held by the commercial banks
• The reduction of the discount rate in order to stimulate lending by commercial banks

2.

If the Fed wishes to increase the money supply it could _______ dollar-denominated bonds or _______ bonds denominated in a foreign currency.

• buy; buy
• buy; sell
• sell; buy
• sell; sell

3.Money is called a "liquid asset" because its nominal value is subject to unpredictable changes.

True

False

4.The four principal components of aggregate demand do not include which of the following?

• Net profitability
• Planned investment
• Net exports
• Government expenditures

5.When a country's exchange rate appreciates, its residents find it _______ expensive to buy goods made in other countries, and imports ___________.

• less; increase
• less; decrease
• more; decrease
• more; increase

6.According to purchasing power parity, when should a nation's currency appreciate?

• When it experiences lower inflation than its trading partners
• When it experiences greater inflation than its trading partners
• When its interest rates are expected to decrease
• When it does not produce products that are traded on international markets

7.In an aggregate demand curve diagram, what is plotted on the horizontal axis?

• Real output
• Nominal output
• Average price level
• Aggregate demand