Question

The Fed undertakes defensive open-market operations

Select one:

when it wants to change monetary policy.

when it wants to change fiscal policy.

to offset a permanent change in money demand.

because of seasonal effects or to offset a temporary change in money demand.

Question 22

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Question text

Which of the following is NOT a financial intermediary?

Select one:

A government treasury.

A mutual fund.

A commercial bank.

A savings institution.

Question 23

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Question text

When people or firms that are worse than average risks are most likely to enter a contract that is offered to everyone, the problem is called

Select one:

moral hazard.

opportunity cost.

irrational expectations.

adverse selection.

Answer 1

21. The Fed undertakes defensive open market operations because of seasonal effects or to offset a temporary change in money demand.

Answer: option D

22. Financial intermediaries are institutions that holds funds from lenders and provide those funds as loans to borrowers. A government treasury doesn't work as a link between investors and borrowers. Hence it is not a financial intermediary.

Answer: option A