According to standard economic theory, during an economic contraction, a central bank should implement ____ monetary policy.

A. contractionary

B. expansionary

If we assume that interest rates will be non-negative, what is a danger of keeping interest rates low?

A. it makes it harder to enact contractionary monetary policy

B. it makes it harder to enact expansionary monetary policy

C. it makes it harder to enact expansionary fiscal policy

D. it makes it harder to enact contractionary fiscal policy

If the money supply is vertical and the Fed takes no action, what determines the interest rate?

A. the quantity of money

B. the Danish krone/euro exchange rate

C. the discount rate

D. demand for money

Why is the interest rate the opportunity cost of holding money?

A. because instead of holding money, you could invest in bonds and earn the interest rate

B. because when you hold money, you pay more in taxes, which is equivalent to the interest rate

C. because holding money requires you to make periodic interest payments to the federal government

D. because money interest represents a great investment opportunity

The discount rate and the federal funds rate in the US are currently both very low (0.25% and 0.09%, respectively). This is an example of _____.

A. expansionary monetary policy

B. contractionary monetary policy

C. expansionary fiscal policy

D. contractionary fiscal policy