If it's safe to assume that most Harvard students were born after 1984 and that primary/secondary education in history, economics and civics hasn't gotten any better since I was in the system (both reasonable assumptions I'd think) then it's hardly surprising that those of us who stop in here do well by comparison. Quite a few questions refer to what were current events at one point for most of us.
chuck—
It's been a long while, but I believe the purchases increase the money supply.
Chuck: Yes, the theory is that when the Fed purchases bonds from banks, given that banks are only required to keep a portion of the funds in reserves and will make loans with the rest, the money supply tends to increase. This in turn exerts downward pressure on interest rates.
I missed #39 & #58. For #58 I thought both B and D were correct and put down D. Can someone explain why D is wrong--- seems to me that by buying in bonds, the Fed would be reducing the amount of debt instruments available and pumping up the money supply, why wouldn't that increase interest rates?
11 comments:
Okay, I only got 91 percent.
I missed one less than you did. The overall scores are pretty pathetic. Advantage - Democrats.
I got 95%. The only question I hadn't the slightest clue about was 58:
What is a major effect of a purchase of bonds by the Federal Reserve?
Could someone explain that to me?
95. And I felt ashamed. It is very, very easy.
If it's safe to assume that most Harvard students were born after 1984 and that primary/secondary education in history, economics and civics hasn't gotten any better since I was in the system (both reasonable assumptions I'd think) then it's hardly surprising that those of us who stop in here do well by comparison. Quite a few questions refer to what were current events at one point for most of us.
chuck—
It's been a long while, but I believe the purchases increase the money supply.
Chuck: Yes, the theory is that when the Fed purchases bonds from banks, given that banks are only required to keep a portion of the funds in reserves and will make loans with the rest, the money supply tends to increase. This in turn exerts downward pressure on interest rates.
Missed three. 58 plus two on philosophy I should have known.
I might have done better 50 years ago, however.
And I did this one after a stiff margarita.
That's my story and I am sticking to it.
I'll join the embarassed.
You answered 55 out of 60 correctly — 91.67 %
"You answered 58 out of 60 correctly — 96.67 %"
I have a natural talent for taking multiple-choice tests. I probably deserve a 53/60.
I missed #39 & #58. For #58 I thought both B and D were correct and put down D. Can someone explain why D is wrong--- seems to me that by buying in bonds, the Fed would be reducing the amount of debt instruments available and pumping up the money supply, why wouldn't that increase interest rates?
marty—
It's supply and demand. The increase in the supply of money puts downward pressure on its price (interest rates) so as to increase demand.
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