Question 1

The Fed targets the 30- year bond rate as its monetary policy instrument.

Accepted Answer

A) True 
 B)False

Question 2

The Taylor rule

Accepted Answer

A)  is the rule actually followed by the Fed. 
B)  focuses on only fluctuations in real GDP. 
C)  ignores price level stability to focus on responding to fluctuations in real GDP. 
D)  shows how the Fed could set the federal funds rate. 
A)  is the rule actually followed by the Fed. 
B)  focuses on only fluctuations in real GDP. 
C)  ignores price level stability to focus on responding to fluctuations in real GDP. 
D)  shows how the Fed could set the federal funds rate.

Question 3

In the short run, the Fed's actions to fight inflation shift the

Accepted Answer

A)  aggregate demand curve rightward. 
B)  short- run aggregate supply curve leftward. 
C)  short- run aggregate supply curve rightward. 
D)  aggregate demand curve leftward. 
A)  aggregate demand curve rightward. 
B)  short- run aggregate supply curve leftward. 
C)  short- run aggregate supply curve rightward. 
D)  aggregate demand curve leftward.

Question 4

When the Federal Reserve increases the Federal funds rate,

Accepted Answer

A)  the quantity of reserves decreases, while the quantity of deposits and bank loans both increase. 
B)  both the quantity of reserves and the quantity of deposits decrease, while bank loans increase. 
C)  the quantity of reserves, the quantity of deposits, and bank loans all increase. 
D)  the quantity of reserves, the quantity of deposits, and bank loans all decrease. 
A)  the quantity of reserves decreases, while the quantity of deposits and bank loans both increase. 
B)  both the quantity of reserves and the quantity of deposits decrease, while bank loans increase. 
C)  the quantity of reserves, the quantity of deposits, and bank loans all increase. 
D)  the quantity of reserves, the quantity of deposits, and bank loans all decrease.

Question 5

Which of the following is NOT a short- run effect of a decrease in the federal funds rate?

Accepted Answer

A)  Aggregate supply increases. 
B)  Net exports increase. 
C)  Aggregate demand increases. 
D)  Inflation rate increases. 
A)  Aggregate supply increases. 
B)  Net exports increase. 
C)  Aggregate demand increases. 
D)  Inflation rate increases.

Question 6

In the short run, an increase in the federal funds rate _ the real interest rate and _ investment.

Accepted Answer

A)  raises; increases 
B)  lowers; decreases 
C)  lowers; increases 
D)  raises; decreases 
A)  raises; increases 
B)  lowers; decreases 
C)  lowers; increases 
D)  raises; decreases

Question 7

In the market for bank reserves, if the federal funds rate target is higher than the federal funds rate, the Fed will take action to reserves.

Accepted Answer

A)  decrease the supply of 
B)  increase the supply of 
C)  decrease the demand for 
D)  increase the demand for 
A)  decrease the supply of 
B)  increase the supply of 
C)  decrease the demand for 
D)  increase the demand for

Question 8

Long- term interest rates fluctuate more than short- term rates.

Accepted Answer

A) True 
 B)False

Question 9

In October 2008, central banks around the world coordinated a decrease in interest rates. Ben Bernanke, Chairman of the Federal Reserve stated that "policy makers will remain in close contact, monitor developments closely and stand ready to take additional steps should conditions warrant."
If all the banks enacted the policy simultaneously, the U.S. interest rate differential would and so the U.S. exchange rate would .

Accepted Answer

A)  not change; rise 
B)  increase; fall 
C)  decrease; rise 
D)  not change; not change 
A)  not change; rise 
B)  increase; fall 
C)  decrease; rise 
D)  not change; not change

Question 10

The federal funds rate is of the Fed.

Accepted Answer

A)  an objective 
B)  a goal 
C)  a technique 
D)  the monetary policy instrument 
A)  an objective 
B)  a goal 
C)  a technique 
D)  the monetary policy instrument

Question 11

Which of the following increases the quantity of money?

Accepted Answer

A)  an increase in the government's budget deficit 
B)  the Fed's purchase of a government security 
C)  an individual's cash withdrawal from a bank 
D)  an individual's purchase of a government security from the Fed 
A)  an increase in the government's budget deficit 
B)  the Fed's purchase of a government security 
C)  an individual's cash withdrawal from a bank 
D)  an individual's purchase of a government security from the Fed

Question 12

The Federal Reserve fights inflation via open market operations, the supply of reserves curve shifts
And the supply of money curve shifts _.

Accepted Answer

A)  leftward; rightward 
B)  leftward; leftward 
C)  rightward; leftward 
D)  rightward; rightward 
A)  leftward; rightward 
B)  leftward; leftward 
C)  rightward; leftward 
D)  rightward; rightward

Question 13

The monetary policy instrument the Federal Reserve choose to use is the

Accepted Answer

A)  exchange rate. 
B)  federal funds rate. 
C)  required reserves rate. 
D)  quantity of money. 
A)  exchange rate. 
B)  federal funds rate. 
C)  required reserves rate. 
D)  quantity of money.

Question 14

The monetary policy instrument the Federal Reserve chooses to use is the

Accepted Answer

A)  discount rate. 
B)  fixed exchange rate. 
C)  flexible exchange rate. 
D)  federal funds rate. 
A)  discount rate. 
B)  fixed exchange rate. 
C)  flexible exchange rate. 
D)  federal funds rate.

Question 15

In an AS/AD figure, lowering the federal funds rate initially shifts the

Accepted Answer

A)  AD curve leftward. 
B)  long- run AS curve leftward. 
C)  AD curve rightward. 
D)  long- run AS curve rightward. 
A)  AD curve leftward. 
B)  long- run AS curve leftward. 
C)  AD curve rightward. 
D)  long- run AS curve rightward.

Question 16

When the Fed sells government securities to a bank, how are the Fed's assets affected?

Accepted Answer

A)  The amount of the Fed's government securities increases. 
B)  The amount of reserves held at the Fed decreases. 
C)  The amount of the Fed's government securities decreases. 
D)  The amount of reserves held at the Fed increases. 
A)  The amount of the Fed's government securities increases. 
B)  The amount of reserves held at the Fed decreases. 
C)  The amount of the Fed's government securities decreases. 
D)  The amount of reserves held at the Fed increases.

Question 17

If the Fed carries out an open market operation and buys U.S. government securities, the federal funds rate and the quantity of reserves .

Accepted Answer

A)  falls; increases 
B)  rises; decreases 
C)  rises; increases 
D)  falls; decreases 
A)  falls; increases 
B)  rises; decreases 
C)  rises; increases 
D)  falls; decreases

Question 18

The Federal Reserve fights recession via open market operations, the supply of loanable funds curve shifts and the aggregate demand curve shifts .

Accepted Answer

A)  rightward; rightward 
B)  leftward; leftward 
C)  leftward; rightward 
D)  rightward; leftward 
A)  rightward; rightward 
B)  leftward; leftward 
C)  leftward; rightward 
D)  rightward; leftward

Question 19

The initial impact of the Fed's open market sale of government securities to banks is

Accepted Answer

A)  an increase in the quantity of money by some multiple of the dollar volume of the sale. 
B)  a decrease of the banking system's reserve deposits at the Fed. 
C)  a decrease in the quantity of money by some multiple of the dollar volume of the sale. 
D)  an increase in bank deposits at the Fed. 
A)  an increase in the quantity of money by some multiple of the dollar volume of the sale. 
B)  a decrease of the banking system's reserve deposits at the Fed. 
C)  a decrease in the quantity of money by some multiple of the dollar volume of the sale. 
D)  an increase in bank deposits at the Fed.

Question 20

The McCallum rule targets the _ and the Taylor rule targets the _ .

Accepted Answer

A)  monetary base; federal funds rate 
B)  federal funds rate; monetary base 
C)  monetary base; monetary base 
D)  federal funds rate; federal funds rate 
A)  monetary base; federal funds rate 
B)  federal funds rate; monetary base 
C)  monetary base; monetary base 
D)  federal funds rate; federal funds rate

The Fed targets the 30- year bond rate as its monetary policy instrument.

The Taylor rule

In the short run, the Fed's actions to fight inflation shift the

When the Federal Reserve increases the Federal funds rate,

Which of the following is NOT a short- run effect of a decrease in the federal funds rate?

In the short run, an increase in the federal funds rate _ the real interest rate and _ investment.

In the market for bank reserves, if the federal funds rate target is higher than the federal funds rate, the Fed will take action to reserves.

Long- term interest rates fluctuate more than short- term rates.

The federal funds rate is of the Fed.

Which of the following increases the quantity of money?

The Federal Reserve fights inflation via open market operations, the supply of reserves curve shifts And the supply of money curve shifts _.

The monetary policy instrument the Federal Reserve choose to use is the

The monetary policy instrument the Federal Reserve chooses to use is the

In an AS/AD figure, lowering the federal funds rate initially shifts the

When the Fed sells government securities to a bank, how are the Fed's assets affected?

If the Fed carries out an open market operation and buys U.S. government securities, the federal funds rate and the quantity of reserves .

The Federal Reserve fights recession via open market operations, the supply of loanable funds curve shifts and the aggregate demand curve shifts .

The initial impact of the Fed's open market sale of government securities to banks is

The McCallum rule targets the _ and the Taylor rule targets the _ .

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

The Fed targets the 30- year bond rate as its monetary policy instrument.

The Taylor rule

In the short run, the Fed's actions to fight inflation shift the

When the Federal Reserve increases the Federal funds rate,

Which of the following is NOT a short- run effect of a decrease in the federal funds rate?

In the short run, an increase in the federal funds rate _ the real interest rate and _ investment.

In the market for bank reserves, if the federal funds rate target is higher than the federal funds rate, the Fed will take action to reserves.

Long- term interest rates fluctuate more than short- term rates.

The federal funds rate is of the Fed.

Which of the following increases the quantity of money?

The Federal Reserve fights inflation via open market operations, the supply of reserves curve shifts And the supply of money curve shifts _.

The monetary policy instrument the Federal Reserve choose to use is the

The monetary policy instrument the Federal Reserve chooses to use is the

In an AS/AD figure, lowering the federal funds rate initially shifts the

When the Fed sells government securities to a bank, how are the Fed's assets affected?

If the Fed carries out an open market operation and buys U.S. government securities, the federal funds rate and the quantity of reserves .

The Federal Reserve fights recession via open market operations, the supply of loanable funds curve shifts and the aggregate demand curve shifts .

The initial impact of the Fed's open market sale of government securities to banks is

The McCallum rule targets the _ and the Taylor rule targets the _ .

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