Quiz #260

• 1. If the central bank offers a positive interest rate on overnight reserves held by the commercial banks equal to its target policy rate, then it no longer has to conduct open market operations to ensure its policy rate is sustained (ignore any reserve requirements in place when answering).
• False
• True
• 2. The payment of a positive return on overnight reserves held by the commercial banks equal to the current policy rate will tend to increase the volume of broad money in the system (ignore any reserve requirements in place when answering).
• False
• True
• 3. Modern Monetary Theory (MMT) shows that a sovereign national government, that is, one that issues its own floating currency faces no solvency risk with respect to the debt it issues.
• False
• True

Quiz #260 answers

• 1. If the central bank offers a positive interest rate on overnight reserves held by the commercial banks equal to its target policy rate, then it no longer has to conduct open market operations to ensure its policy rate is sustained (ignore any reserve requirements in place when answering).

Answer: True

• 2. The payment of a positive return on overnight reserves held by the commercial banks equal to the current policy rate will tend to increase the volume of broad money in the system (ignore any reserve requirements in place when answering).

Answer: False

• 3. Modern Monetary Theory (MMT) shows that a sovereign national government, that is, one that issues its own floating currency faces no solvency risk with respect to the debt it issues.

Answer: False