Quiz #595 answers

• 1. Ignoring any reserve requirements that might be imposed, if the central bank pays a positive interest rate on overnight reserves held by the commercial banks then it may still have to conduct open market operations as a means of ensuring that levels of bank reserves are consistent with its policy target rate of interest.

Answer: True

• 2. If participation rates are constant, percentage unemployment will not change as long as employment growth matches the pace of growth in the working age population (people above 15 years of age).

Answer: True

• 3. Mainstream monetary theory highlights the concept of a money multiplier which says that the money supply is some multiple of the monetary base (bank reserves and currency). There is a direct relationship between the monetary base and the broad money supply in a modern monetary economy.

Answer: True