Question: 1. How can the Fed reduce a continuing inflation?

a) by increasing the money supply growth rate

b) by decreasing the required reserve ratio

c) by buying government bonds from commercial banks.t of the aggregate demand curve

d) by slowing the continuing leftward shift of the aggregate demand curve

e) by decreasing the money supply growth rate

2. If there is a sudden increase in government spending, which of the following should the Fed do if it wants to keep the price level steady?

a) buy bonds in the open market

b) do nothing, since the self-correcting mechanism will adjust the economy

c) sell bonds in the open market d)decrease the required reserve ratio

e) wait, since the price level usually does not change when government spending increases

3. he AD curve shifts to the right when

a) the Fed lowers interest rates

b) the Fed raises interest rates

c) the Fed lowers its spending

d) the Fed increases its spending

4. The U.S. inflation rate

a) was the most serious economic problem from 2005 - 2015

b) grew rapidly after 2000

c) has been stable since 1965

d) fell significantly after 2008

5. If there is a sudden increase in government spending, which of the following should the Fed do if it wants to keep the price level steady?

a) buy bonds in the open market

b) do nothing, since the self-correcting mechanism will adjust the economy

c) sell bonds in the open market

d) decrease the required reserve ratio

e) wait, since the price level usually does not change when government spending increases