Practice Questions
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How do open market operations typically influence economic growth?
When the central bank buys or sells government bonds, it changes the amount of money in the economy. Other options are incorrect because Some might th...
How do open market operations influence the economy compared to fiscal policy tools?
Open market operations control the money supply. Other options are incorrect because This answer mixes up the roles of each tool; This answer suggests...
What is the primary purpose of a central bank conducting open market operations as part of an expansionary monetary policy?
The main goal is to add more money to the economy. Other options are incorrect because This answer suggests reducing money and raising interest rates;...
How does a central bank use open market operations to implement a contractionary policy?
When a central bank sells government securities, it takes money out of the economy. Other options are incorrect because Some might think buying securi...
How do open market operations, as a tool of monetary policy, influence market equilibrium during an expansionary policy?
Open market operations increase the money supply. Other options are incorrect because This option suggests that the money supply decreases; This choic...
What is the primary purpose of open market operations conducted by a central bank?
The main goal of open market operations is to control inflation and stabilize the currency. Other options are incorrect because Some might think open ...
How do open market operations primarily affect the money supply in an economy?
Open market operations change the money supply by buying or selling government securities. Other options are incorrect because Some might think govern...
What is the primary effect of open market operations on interest rates in an economy?
When the government buys securities, it puts more money into the economy. Other options are incorrect because Some might think selling securities rais...
When a central bank engages in open market operations by selling government bonds, how does this action impact the economy in the short run?
When the central bank sells government bonds, it takes money out of the economy. Other options are incorrect because This answer suggests that selling...
If a central bank sells government bonds in the open market, what is the most likely short-term effect on the economy?
When a central bank sells bonds, it takes money out of the economy. Other options are incorrect because Some might think selling bonds lowers interest...
When a central bank conducts open market operations by selling government bonds, it primarily aims to _____ the money supply and _____ interest rates, which in turn affects aggregate demand.
When the central bank sells bonds, it takes money out of the economy. Other options are incorrect because This answer suggests that selling bonds adds...
If the central bank conducts open market operations by selling government bonds, what is the most likely immediate effect on the economy?
When the central bank sells government bonds, it takes money out of the economy. Other options are incorrect because Some might think selling bonds lo...
How does the Central Bank's decision to sell government bonds affect the economy in the short run?
When the Central Bank sells government bonds, it takes money out of the economy. Other options are incorrect because This answer suggests that selling...
Arrange the following steps in the correct order to describe the effect of open market operations on the economy: A) Central Bank sells government bonds to financial institutions B) Reserves in the banking system decrease C) Interest rates increase D) Aggregate demand decreases due to reduced spending
When the central bank sells government bonds, banks have less money to lend. Other options are incorrect because This option suggests that interest ra...
If open market operations are to interest rates as a thermostat is to room temperature, what is the role of the Central Bank in this analogy?
The Central Bank controls the money supply. Other options are incorrect because This answer suggests that the Central Bank only focuses on government ...
Which of the following accurately describe the effects of open market operations conducted by a Central Bank? Select all that apply.
All the statements about open market operations are incorrect. Other options are incorrect because Some might think selling bonds reduces money; It's ...
A central bank decides to sell government bonds in an effort to control inflation. How would this action most likely impact the short-term interest rates and overall economic activity?
When the central bank sells bonds, it takes money out of the economy. Other options are incorrect because Some might think selling bonds lowers intere...
Master Open Market Operations
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