Question 1

The Taylor rule

Accepted Answer

A) advocates lowering interest rates in response to a higher output level 
B) advocates a strict monetary growth rate 
C) advocates stable interest rates 
D) helps a central bank in setting its target interest rates based on current economic conditions 
E) is of little help in the short-term stabilization of the economy 
A) advocates lowering interest rates in response to a higher output level 
B) advocates a strict monetary growth rate 
C) advocates stable interest rates 
D) helps a central bank in setting its target interest rates based on current economic conditions 
E) is of little help in the short-term stabilization of the economy

Question 2

The Taylor rule

Accepted Answer

A) is an activist monetary policy rule 
B) states that monetary growth should be decreased by 1% for every 1.5% increase in inflation 
C) states that real interest rates should be increased by 0.5% for every 1% increase in inflation 
D) both A and B 
E) both A and C 
A) is an activist monetary policy rule 
B) states that monetary growth should be decreased by 1% for every 1.5% increase in inflation 
C) states that real interest rates should be increased by 0.5% for every 1% increase in inflation 
D) both A and B 
E) both A and C

Question 3

Which of the following is NOT a result of monetary policy?

Accepted Answer

A) aggregate demand is affected, leading to a change in nominal GDP 
B) the level of potential GDP will change 
C) spending on investment and durable consumption goods	 is affected 
D) the rates of unemployment and inflation are affected in the short run 
E) real interest rates will remain unaffected in the long run 
A) aggregate demand is affected, leading to a change in nominal GDP 
B) the level of potential GDP will change 
C) spending on investment and durable consumption goods	 is affected 
D) the rates of unemployment and inflation are affected in the short run 
E) real interest rates will remain unaffected in the long run

Question 4

The U.S.Fed can most effectively achieve an established federal funds rate target by

Accepted Answer

A) leaking information about its future intentions to financial markets 
B)  maintaining a stable monetary growth rate 
C)  undertaking open market operations to influence bank reserves 
D) adjusting monetary growth to maintain a stable inflation rate 
E) selling Treasury bills whenever short-term interest rates increase 
A) leaking information about its future intentions to financial markets 
B)  maintaining a stable monetary growth rate 
C)  undertaking open market operations to influence bank reserves 
D) adjusting monetary growth to maintain a stable inflation rate 
E) selling Treasury bills whenever short-term interest rates increase

Question 5

The Taylor rule implies that a central bank should adjust interest rates frequently

Accepted Answer

A) with particular emphasis on capital movements across borders 
B) but only in response to changes in the inflation rate 
C) but only in response to changes in the output gap 
D) whenever output or inflation deviates from the desired levels 
E) none of the above 
A) with particular emphasis on capital movements across borders 
B) but only in response to changes in the inflation rate 
C) but only in response to changes in the output gap 
D) whenever output or inflation deviates from the desired levels 
E) none of the above

Question 6

Short-run monetary policy changes should

Accepted Answer

A) ignore any fiscal policy changes that the administration has implemented 
B) allow for modest adjustments once feedback from previous changes is available 
C) never be implemented if uncertainty exists about the exact effects on key variables 
D) requires the central bank to stick to its announced policy target no matter what 
E) none of the above 
A) ignore any fiscal policy changes that the administration has implemented 
B) allow for modest adjustments once feedback from previous changes is available 
C) never be implemented if uncertainty exists about the exact effects on key variables 
D) requires the central bank to stick to its announced policy target no matter what 
E) none of the above

Question 7

If a central bank follows an activist monetary policy rule,

Accepted Answer

A) full employment can always be maintained with little or no inflation 
B)  financial markets always need advance notice of any policy change so the central bank does not lose its credibility 
C) the focus is generally on expected future economic conditions while current economic conditions are ignored 
D) the focus is generally on the long-run inflation rate with little concern about unemployment 
E) none of the above 
A) full employment can always be maintained with little or no inflation 
B)  financial markets always need advance notice of any policy change so the central bank does not lose its credibility 
C) the focus is generally on expected future economic conditions while current economic conditions are ignored 
D) the focus is generally on the long-run inflation rate with little concern about unemployment 
E) none of the above

Question 8

The rule that tells a central bank how to set interest rates in response to changes in economic activity is known as the

Accepted Answer

A) federal funds rule 
B) interest rate rule 
C) monetary growth rule 
D) Taylor rule 
E) Friedman rule 
A) federal funds rule 
B) interest rate rule 
C) monetary growth rule 
D) Taylor rule 
E) Friedman rule

Question 9

Assume a central bank announced a zero percent inflation target.If the current inflation rate is 2.4%, and output is at the full-employment level, at what level should the central bank set the nominal interest rate according to the Taylor rule?

Accepted Answer

A) 1)2% 
B) 1)8% 
C) 2)4% 
D) 3)0% 
E) 3)6% 
A) 1)2% 
B) 1)8% 
C) 2)4% 
D) 3)0% 
E) 3)6%

Question 10

When a central bank engages in inflation targeting, then

Accepted Answer

A) interest rate stability will automatically result 
B) interest rates need to be raised as soon as the output gap starts to shrink 
C) the Taylor rule can still be used as a guide as long as the output coefficient is set to zero 
D) the Taylor rule can still be used as a guide as long as the output coefficient has a lot of weight 
E) none of the above 
A) interest rate stability will automatically result 
B) interest rates need to be raised as soon as the output gap starts to shrink 
C) the Taylor rule can still be used as a guide as long as the output coefficient is set to zero 
D) the Taylor rule can still be used as a guide as long as the output coefficient has a lot of weight 
E) none of the above

The Taylor rule

The Taylor rule

Which of the following is NOT a result of monetary policy?

The U.S.Fed can most effectively achieve an established federal funds rate target by

The Taylor rule implies that a central bank should adjust interest rates frequently

Short-run monetary policy changes should

If a central bank follows an activist monetary policy rule,

The rule that tells a central bank how to set interest rates in response to changes in economic activity is known as the

Assume a central bank announced a zero percent inflation target.If the current inflation rate is 2.4%, and output is at the full-employment level, at what level should the central bank set the nominal interest rate according to the Taylor rule?

When a central bank engages in inflation targeting, then

Introduction

National income accounting

Growth and accumulation

Growth and policy

Aggregate supply and demand

Aggregate supply and the phillips curve

Unemployment

Inflation

Income and spending

Money, interest, and income

Monetary and fiscal policy

International linkages

Consumption and saving

Investment spending

The demand for money

The fed, money, and credit

Policy

Financial markets and asset prices

The national debt

Recession and depression

Inflation and hyperinflation

International adjustment and interdependence

Advanced topics

Filters

Exam 9: Policy preview

The Taylor rule

The Taylor rule

Which of the following is NOT a result of monetary policy?

The U.S.Fed can most effectively achieve an established federal funds rate target by

The Taylor rule implies that a central bank should adjust interest rates frequently

Short-run monetary policy changes should

If a central bank follows an activist monetary policy rule,

The rule that tells a central bank how to set interest rates in response to changes in economic activity is known as the

Assume a central bank announced a zero percent inflation target.If the current inflation rate is 2.4%, and output is at the full-employment level, at what level should the central bank set the nominal interest rate according to the Taylor rule?

When a central bank engages in inflation targeting, then

Introduction

National income accounting

Growth and accumulation

Growth and policy

Aggregate supply and demand

Aggregate supply and the phillips curve

Unemployment

Inflation

Income and spending

Money, interest, and income

Monetary and fiscal policy

International linkages

Consumption and saving

Investment spending

The demand for money

The fed, money, and credit

Policy

Financial markets and asset prices

The national debt

Recession and depression

Inflation and hyperinflation

International adjustment and interdependence

Advanced topics

Filters