Re: Interesting US civics test
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You answered 47 out of 60 correctly — 78.33 %
I have a B.A. in economics, that's definitely what a public good is.
BUT... question 58, a fellow econ grad needs to help me out.
What is a major effect of a purchase of bonds by the Federal Reserve?
A. A reduction in the supply of common stock.
B. An increase in the volume of commercial bank loans.
C. A decrease in the supply of money.
D. An increase in interest rates.
E. A decrease in investment spending by businesses.
Purchase of bonds by Fed = increase in money supply = increase in interest rates, no? So I thought D.
Furthermore, B C & E all seem consistent with a LOWER interest rate. Yet the answer is B? I'm so confused!
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Someone already answered about C being wrong because the money supply increases. I believe E is wrong because the "interest rate" being discussed is that offered by banks in the form of loans. Which means it would be easier for corporations to loan money and invest it in projects that would return a higher rate.
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