Author Question: Assume that the central bank tries to reduce unemployment by reducing the discount rate for banks. ... (Read 95 times)

abern · **on:** Jun 30, 2018

Assume that the central bank tries to reduce unemployment by reducing the discount rate for banks. Which of the following unwelcome effects is not a side effect of this measure?
a. Higher inflation rates.
b. Declining nominal exchange rate
c. Crowding out.
d. All of the above are side effects of a reduced discount rate.

Question 2

If you deposit 500 into a savings deposit, the immediate effect (do not consider the money multiplier which we will study in the next chapter) is:
a. M1 rises, M2 falls, and the monetary base remains the same.
b. M1 falls, M2 remains the same, and the monetary base remains the same.
c. M1 rises, M2 rises, and the monetary base remains the same.
d. M1, M2, and the monetary base rise.
e. M1, M2, and the monetary base fall.