A consumer holds money to meet spending needs. this would be an example of the

52. A consumer holds money to meet spending needs. This would be an example of the: A. Use of money as a measure of value B. Use of money as legal tender C. Liquidity demand, also known as transactions demand for money D. Asset demand for money Use the graph to answer question 53 6 5 Interest Rate D E 0 $50 100 150 200 250 300 Amount of Money Demanded ($B) 53. Refer to the graph above. If the supply of money was $200 billion, the interest rate would be: A. 1 percent B. 2 percent C. 3 percent D. 4 percent 54. The conduct of monetary policy in the United States is the main responsibility of the: A. U.S. Treasury B. Federal Reserve System C. Office of Management and Budget D. Bureau of Economic Analysis 55. The fundamental objective of monetary policy is to assist the economy in achieving: A. A rapid pace of economic growth B. A money supply which is based on the gold standard C. A full-employment, noninflationary level of total output D. A balanced-budget consistent with full-employment 56. The purchase and sale of government securities by the Fed is called: A. Federal funds market B. Open market operations C. Money market transactions D. Term auction facility

Answer

52.

Transaction demand for money means
money required for daily transaction or expenditure.

Hence it can be said that a
consumer holds money to meet spending needs. This would be an
example of the liquidity demand, also known as transactions demand
for money.

Hence option C is the correct
answer.

53.

Since the equilibrium interest rate
is determined by the intersection of the money demand curve and
money supply curve. The money demand curve is downward sloping and
money supply curve is vertical line. Hence when the money supply is
$200 billion, the interest rate would be 2%.

Hence option B is the correct
answer.

54.

Since the monetary policy is
conducted by the Central Bank of the Country and Federal Reserve
system of US is Central Bank of the country US.

The Fed uses the
required reserve ratio, federal fund rate and open market operation
for changing the money supply.

Hence it can be said that the
conduct of monetary policy in the US is the main responsibility of
the Federal Reserve system.

Hence option B is the correct
answer.

55.

Since the monetary policy is
conducted by the Central Bank of the Country and Federal Reserve
system of US is Central Bank of the country US.

The Fed uses the
required reserve ratio, federal fund rate and open market operation
for changing the money supply.

Hence it can be said that the
fundamental objective of the monetary policy is to assist the
economy in achieving a rapid pace of economic growth.

This is because when Fed buys bonds, then money supply increases,
and so it shifts rightward. As a result, interest rate decreases.
So at lower interest rate it is less expensive to invest, so
investment spending increases. As a result, AD increases, so price
level increases and equilibrium GDP also increases.

Hence option A is the correct
answer.

56.

The open market operation means
sale and purchase of government securities and bonds by the Central
Bank of country for influencing money supply in the
economy.

With the
open market purchase of government securities money supply
increases, so it leads to expansion of money supply in the
economy.

Hence it
can be said that the purchase and sale of government securities by
the Fed is called open market operations.

Hence option B is the correct
answer.