Question 1

Once a zero interest rate has been reached, even though continuing to increase the money supply will not lower the interest rate, the process can stimulate the economy.

Accepted Answer

A) True 
 B)False

Question 2

The European Economic and Monetary Union (EMU) was formed to

Accepted Answer

A) allocate different currencies to European member nations. 
B) adopt a common currency for its member nations. 
C) implement a flexible exchange rate policy for member nations. 
D) implement restrictive trade policy for non-member nations. 
E) implement a fixed exchange rate with the United States. 
A) allocate different currencies to European member nations. 
B) adopt a common currency for its member nations. 
C) implement a flexible exchange rate policy for member nations. 
D) implement restrictive trade policy for non-member nations. 
E) implement a fixed exchange rate with the United States.

Question 3

The Fed's monetary policy rule is more than just a simple relationship between inflation and interest rates.

Accepted Answer

A) True 
 B)False

Question 4

Answer the questions below:

Accepted Answer

The answer of Answer the questions below:
  
...

Question 5

In most cases, the Fed can determine whether real and potential GDP are equal.

Accepted Answer

A) True 
 B)False

Question 6

Who is the current chairperson of the Federal Reserve Board?

Accepted Answer

A) Tim Geithner 
B) Paul Volcker 
C) Alan Greenspan 
D) George Soros 
E) Janet Yellen 
A) Tim Geithner 
B) Paul Volcker 
C) Alan Greenspan 
D) George Soros 
E) Janet Yellen

Question 7

When the rate of interest increases,

Accepted Answer

A) the opportunity cost of money increases, and the quantity of money demanded increases. 
B) the opportunity cost of money decreases, and the quantity of money demanded declines. 
C) the demand for money is unaffected. 
D) the opportunity cost of money decreases, and the quantity of money demanded increases. 
E) the opportunity cost of money increases, and the quantity of money demanded declines. 
A) the opportunity cost of money increases, and the quantity of money demanded increases. 
B) the opportunity cost of money decreases, and the quantity of money demanded declines. 
C) the demand for money is unaffected. 
D) the opportunity cost of money decreases, and the quantity of money demanded increases. 
E) the opportunity cost of money increases, and the quantity of money demanded declines.

Question 8

If the Fed believes that real GDP is below potential GDP, it will

Accepted Answer

A) lower interest rates to shift the AD curve to the right and the IA line upward. 
B) do nothing and wait for the IA line to shift and return real GDP to potential GDP at a lower inflation rate. 
C) lower interest rates to shift the AD curve to the right. 
D) lower interest rates to shift the IA line downward. 
E) lower interest rates to shift the AD curve to the right and the IA line downward. 
A) lower interest rates to shift the AD curve to the right and the IA line upward. 
B) do nothing and wait for the IA line to shift and return real GDP to potential GDP at a lower inflation rate. 
C) lower interest rates to shift the AD curve to the right. 
D) lower interest rates to shift the IA line downward. 
E) lower interest rates to shift the AD curve to the right and the IA line downward.

Question 9

If prices and wages were perfectly flexible and Congress had control over central bank decisions, Congress would have

Accepted Answer

A) no political incentive to adjust the target rate of inflation. 
B) a long-run incentive to lower the target rate of inflation. 
C) a short-run incentive to raise the target rate of inflation. 
D) a short-run incentive to lower the target rate of inflation. 
E) a long-run incentive to raise the target rate of inflation. 
A) no political incentive to adjust the target rate of inflation. 
B) a long-run incentive to lower the target rate of inflation. 
C) a short-run incentive to raise the target rate of inflation. 
D) a short-run incentive to lower the target rate of inflation. 
E) a long-run incentive to raise the target rate of inflation.

Question 10

Given that the money demand function is not stable, why does the Fed think it is best to fix interest rates instead of growth in the money supply?

Accepted Answer

If the Fed instead fixed the m

Question 11

If prices and wages are perfectly flexible, there is never any tradeoff between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 12

Quantitative easing increases all the following except

Accepted Answer

A) interest rates. 
B) reserves. 
C) the monetary base. 
D) the money supply. 
E) the size of the Fed's balance sheet. 
A) interest rates. 
B) reserves. 
C) the monetary base. 
D) the money supply. 
E) the size of the Fed's balance sheet.

Question 13

What do economists mean when they refer to the "size" of the Fed's balance sheet?

Accepted Answer

A) the size of the money supply it controls. 
B) its ability to set fiscal policy. 
C) its operating budget. 
D) the sum of all the assets on its balance sheet. 
E) its net worth. 
A) the size of the money supply it controls. 
B) its ability to set fiscal policy. 
C) its operating budget. 
D) the sum of all the assets on its balance sheet. 
E) its net worth.

Question 14

As a result of the financial crisis, from 2007 to 2009, the size of the Fed's balance sheet more than doubled.

Accepted Answer

A) True 
 B)False

Question 15

Explain why there is a tradeoff between inflation and unemployment in the medium run.

Accepted Answer

If the aggregate demand curve shifts to

Question 16

To "cool off the economy," the Fed will raise interest rates.

Accepted Answer

A) True 
 B)False

Question 17

The Central Bank of New Zealand has lost its independence in the last three decades.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a country is experiencing a deflation while real GDP is below potential GDP.

Accepted Answer

The answer of Suppose a country is experiencing a deflation...

Question 19

A situation in which the interest rate gets so high that consumers and companies no longer can afford to obtain credit is known as a liquidity trap.

Accepted Answer

A) True 
 B)False

Question 20

What does the Phillips curve measure?

Accepted Answer

The tradeoff between inflation

Exam 27: Monetary Policy

Once a zero interest rate has been reached, even though continuing to increase the money supply will not lower the interest rate, the process can stimulate the economy.

The European Economic and Monetary Union (EMU) was formed to

The Fed's monetary policy rule is more than just a simple relationship between inflation and interest rates.

Answer the questions below:

In most cases, the Fed can determine whether real and potential GDP are equal.

Who is the current chairperson of the Federal Reserve Board?

When the rate of interest increases,

If the Fed believes that real GDP is below potential GDP, it will

If prices and wages were perfectly flexible and Congress had control over central bank decisions, Congress would have

Given that the money demand function is not stable, why does the Fed think it is best to fix interest rates instead of growth in the money supply?

If prices and wages are perfectly flexible, there is never any tradeoff between inflation and unemployment.

Quantitative easing increases all the following except

What do economists mean when they refer to the "size" of the Fed's balance sheet?

As a result of the financial crisis, from 2007 to 2009, the size of the Fed's balance sheet more than doubled.

Explain why there is a tradeoff between inflation and unemployment in the medium run.

To "cool off the economy," the Fed will raise interest rates.

The Central Bank of New Zealand has lost its independence in the last three decades.

Suppose a country is experiencing a deflation while real GDP is below potential GDP.

A situation in which the interest rate gets so high that consumers and companies no longer can afford to obtain credit is known as a liquidity trap.

What does the Phillips curve measure?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Economic Growth Around the World

International Trade

International Finance

Filters