Question 1

When the Fed raises the federal funds rate,

Accepted Answer

A)  net exports increase. 
B)  consumption increases. 
C)  the value of the dollar falls on the foreign exchange market. 
D)  the value of the dollar rises on the foreign exchange market. 
A)  net exports increase. 
B)  consumption increases. 
C)  the value of the dollar falls on the foreign exchange market. 
D)  the value of the dollar rises on the foreign exchange market. D

Question 2

Which of the following are NOT Federal Reserve monetary policy goals?

Accepted Answer

A)  maximum employment 
B)  price level stability 
C)  moderate long- term interest rates 
D)  zero percent unemployment. 
A)  maximum employment 
B)  price level stability 
C)  moderate long- term interest rates 
D)  zero percent unemployment. D

Question 3

If the Fed carries out an open market operation and sells U.S. government securities, the federal funds rate falls and the quantity of money increases.

Accepted Answer

A) True 
 B)False  False

Question 4

If the Fed lowers the federal funds rate so that the exchange rate falls, then imports _ and exports _.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase

Question 5

The ripple effects that occur when the Fed sells securities in the open market include .

Accepted Answer

A)  a decrease in interest rates 
B)  an increase in net exports 
C)  an increase in short- run aggregate supply 
D)  a decrease in consumption and investment 
A)  a decrease in interest rates 
B)  an increase in net exports 
C)  an increase in short- run aggregate supply 
D)  a decrease in consumption and investment

Question 6

-In the above figure, suppose point C is the original equilibrium. If the Fed hikes the federal funds rate, the new equilibrium is given by point

Accepted Answer

A)  A. 
B)  B. 
C)  C (that is, the equilibrium does not change). 
D)  D. 
A)  A. 
B)  B. 
C)  C (that is, the equilibrium does not change). 
D)  D.

Question 7

According to the AS/AD model, in the short run an increase in the federal funds rate will

Accepted Answer

A)  decrease the equilibrium price level and decrease equilibrium real GDP. 
B)  decrease the equilibrium price level but leave equilibrium real GDP unchanged. 
C)  decrease equilibrium real GDP but leave the equilibrium price level unchanged. 
D)  increase the equilibrium price level and decrease equilibrium real GDP. 
A)  decrease the equilibrium price level and decrease equilibrium real GDP. 
B)  decrease the equilibrium price level but leave equilibrium real GDP unchanged. 
C)  decrease equilibrium real GDP but leave the equilibrium price level unchanged. 
D)  increase the equilibrium price level and decrease equilibrium real GDP.

Question 8

When the Federal Reserve increases the Federal funds rate,

Accepted Answer

A)  both the supply of bank loans and the supply of loanable funds increase, while the real interest rate increases. 
B)  both the supply of bank loans and the supply of loanable funds increase, thereby decreasing the real interest rate. 
C)  the supply of bank loans decreases, while the supply of loanable funds and the real interest rate both increase. 
D)  both the supply of bank loans and the supply of loanable funds decrease, thereby increasing the real interest rate. 
A)  both the supply of bank loans and the supply of loanable funds increase, while the real interest rate increases. 
B)  both the supply of bank loans and the supply of loanable funds increase, thereby decreasing the real interest rate. 
C)  the supply of bank loans decreases, while the supply of loanable funds and the real interest rate both increase. 
D)  both the supply of bank loans and the supply of loanable funds decrease, thereby increasing the real interest rate.

Question 9

Monetary policy produces ripple effects, some of which happen quickly and some that can take years to produce change. Which of the following takes the longest to change?

Accepted Answer

A)  exchange rate 
B)  monetary base 
C)  federal funds rate 
D)  inflation rate 
A)  exchange rate 
B)  monetary base 
C)  federal funds rate 
D)  inflation rate

Question 10

The current chairman of the Federal Reserve is

Accepted Answer

A)  Alan Greenspan. 
B)  Paul Volcker. 
C)  Ben Bernanke. 
D)  Milton Friedman. 
A)  Alan Greenspan. 
B)  Paul Volcker. 
C)  Ben Bernanke. 
D)  Milton Friedman.

Question 11

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

Accepted Answer

A)  The Fed will pay by increasing the University National Bank's deposit account with the Fed by $10 million. 
B)  The Fed will pay by decreasing the University National Bank's deposit account with the Fed by $10 million. 
C)  The University National Bank has $10 million more in securities. 
D)  The University National Bank has $10 million less in excess reserves. 
A)  The Fed will pay by increasing the University National Bank's deposit account with the Fed by $10 million. 
B)  The Fed will pay by decreasing the University National Bank's deposit account with the Fed by $10 million. 
C)  The University National Bank has $10 million more in securities. 
D)  The University National Bank has $10 million less in excess reserves.

Question 12

The Fed buys U.S. government securities from banks in order to

Accepted Answer

A)  lower the federal funds rate. 
B)  decrease banks' reserves. 
C)  reduce the government's budget deficit. 
D)  None of the above answers are correct. 
A)  lower the federal funds rate. 
B)  decrease banks' reserves. 
C)  reduce the government's budget deficit. 
D)  None of the above answers are correct.

Question 13

Suppose the economy is in a recession and the Fed lowers the federal funds rate. Then

Accepted Answer

A)  real GDP will decrease and the price level will increase. 
B)  real GDP and the price level will both increase. 
C)  real GDP and the price level will both decrease. 
D)  real GDP will increase and the price level will decrease. 
A)  real GDP will decrease and the price level will increase. 
B)  real GDP and the price level will both increase. 
C)  real GDP and the price level will both decrease. 
D)  real GDP will increase and the price level will decrease.

Question 14

As firms expect future profits to increase, they increase their investment. As a result, real GDP rises above potential GDP. If the Fed followed Friedman's k- percent rule, the Fed would

Accepted Answer

A)  increase the quantity of money more than usual. 
B)  continue allowing the quantity of money to grow at "k" percent. 
C)  decrease the quantity of money. 
D)  raise the federal funds rate. 
A)  increase the quantity of money more than usual. 
B)  continue allowing the quantity of money to grow at "k" percent. 
C)  decrease the quantity of money. 
D)  raise the federal funds rate.

Question 15

Suppose that initially real GDP equals potential GDP. Then a decrease in aggregate demand occurs. According to the Taylor rule, the Fed should the federal funds rate by government securities in the open market.

Accepted Answer

A)  raise; buying 
B)  raise; selling 
C)  lower; buying 
D)  lower; selling 
A)  raise; buying 
B)  raise; selling 
C)  lower; buying 
D)  lower; selling

Question 16

Suppose that initially real GDP equals potential GDP. Then an increase in aggregate demand occurs. According to the Taylor rule, the Fed should the federal funds rate by _ government securities in the open market.

Accepted Answer

A)  lower; buying 
B)  raise; selling 
C)  lower; selling 
D)  raise; buying 
A)  lower; buying 
B)  raise; selling 
C)  lower; selling 
D)  raise; buying

Question 17

The Federal Open Market Committee meets times per year.

Accepted Answer

A)  8 
B)  26 
C)  2 
D)  52 
A)  8 
B)  26 
C)  2 
D)  52

Question 18

If the Fed lowers the federal funds rate, aggregate demand decreases.

Accepted Answer

A) True 
 B)False

Question 19

If the Fed sells bonds in the open market, net exports will increase.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the economy is in recession. Write a letter to the brand- new chairman of the Federal Reserve suggesting how the Fed might help end the recession. Be sure to explain how a change in monetary policy will affect economic activity.

Accepted Answer

The Fed needs to lower the federal funds

When the Fed raises the federal funds rate,

Which of the following are NOT Federal Reserve monetary policy goals?

If the Fed carries out an open market operation and sells U.S. government securities, the federal funds rate falls and the quantity of money increases.

If the Fed lowers the federal funds rate so that the exchange rate falls, then imports _ and exports _.

The ripple effects that occur when the Fed sells securities in the open market include .

-In the above figure, suppose point C is the original equilibrium. If the Fed hikes the federal funds rate, the new equilibrium is given by point

According to the AS/AD model, in the short run an increase in the federal funds rate will

When the Federal Reserve increases the Federal funds rate,

Monetary policy produces ripple effects, some of which happen quickly and some that can take years to produce change. Which of the following takes the longest to change?

The current chairman of the Federal Reserve is

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

The Fed buys U.S. government securities from banks in order to

Suppose the economy is in a recession and the Fed lowers the federal funds rate. Then

As firms expect future profits to increase, they increase their investment. As a result, real GDP rises above potential GDP. If the Fed followed Friedman's k- percent rule, the Fed would

Suppose that initially real GDP equals potential GDP. Then a decrease in aggregate demand occurs. According to the Taylor rule, the Fed should the federal funds rate by government securities in the open market.

Suppose that initially real GDP equals potential GDP. Then an increase in aggregate demand occurs. According to the Taylor rule, the Fed should the federal funds rate by _ government securities in the open market.

The Federal Open Market Committee meets times per year.

If the Fed lowers the federal funds rate, aggregate demand decreases.

If the Fed sells bonds in the open market, net exports will increase.

Suppose the economy is in recession. Write a letter to the brand- new chairman of the Federal Reserve suggesting how the Fed might help end the recession. Be sure to explain how a change in monetary policy will affect economic activity.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

International Trade Policy

Filters

Exam 14: Monetary Policy

When the Fed raises the federal funds rate,

Which of the following are NOT Federal Reserve monetary policy goals?

If the Fed carries out an open market operation and sells U.S. government securities, the federal funds rate falls and the quantity of money increases.

If the Fed lowers the federal funds rate so that the exchange rate falls, then imports _ and exports _.

The ripple effects that occur when the Fed sells securities in the open market include .

-In the above figure, suppose point C is the original equilibrium. If the Fed hikes the federal funds rate, the new equilibrium is given by point

According to the AS/AD model, in the short run an increase in the federal funds rate will

When the Federal Reserve increases the Federal funds rate,

Monetary policy produces ripple effects, some of which happen quickly and some that can take years to produce change. Which of the following takes the longest to change?

The current chairman of the Federal Reserve is

Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?

The Fed buys U.S. government securities from banks in order to

Suppose the economy is in a recession and the Fed lowers the federal funds rate. Then

As firms expect future profits to increase, they increase their investment. As a result, real GDP rises above potential GDP. If the Fed followed Friedman's k- percent rule, the Fed would

Suppose that initially real GDP equals potential GDP. Then a decrease in aggregate demand occurs. According to the Taylor rule, the Fed should the federal funds rate by government securities in the open market.

Suppose that initially real GDP equals potential GDP. Then an increase in aggregate demand occurs. According to the Taylor rule, the Fed should the federal funds rate by _ government securities in the open market.

The Federal Open Market Committee meets times per year.

If the Fed lowers the federal funds rate, aggregate demand decreases.

If the Fed sells bonds in the open market, net exports will increase.

Suppose the economy is in recession. Write a letter to the brand- new chairman of the Federal Reserve suggesting how the Fed might help end the recession. Be sure to explain how a change in monetary policy will affect economic activity.

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

International Trade Policy

Filters