Question 1

The sale of government securities by the Fed leads to

Accepted Answer

A)  an increase in the federal funds rate. 
B)  a contraction in bank lending. 
C)  a decrease in bank reserves. 
D)  All of the above answers are correct. 
A)  an increase in the federal funds rate. 
B)  a contraction in bank lending. 
C)  a decrease in bank reserves. 
D)  All of the above answers are correct.

Question 2

If the Fed raises the interest rate, the first effect in an AS/AD figure is a shift of the
Curve.

Accepted Answer

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

Question 3

The McCallum rule is an example of

Accepted Answer

A)  an inflation rate targeting rule. 
B)  an exchange rate targeting rule. 
C)  a money targeting rule. 
D)  a monetary base instrument rule. 
A)  an inflation rate targeting rule. 
B)  an exchange rate targeting rule. 
C)  a money targeting rule. 
D)  a monetary base instrument rule.

Question 4

Price level stability

Accepted Answer

A)  was attained by the Fed for the period between 1973 and 1984. 
B)  has no relationship to growth in potential GDP. 
C)  is thought by most economists to be reached with a measured inflation rate of between 0 and 3 percent a year. 
D)  is the most important tool of the Federal Reserve. 
A)  was attained by the Fed for the period between 1973 and 1984. 
B)  has no relationship to growth in potential GDP. 
C)  is thought by most economists to be reached with a measured inflation rate of between 0 and 3 percent a year. 
D)  is the most important tool of the Federal Reserve.

Question 5

When would the Fed want to carry out a monetary policy that decreases aggregate demand?

Accepted Answer

The Fed wants to decrease aggregate dema

Question 6

In the short run, the Fed's actions to fight an inflationary gap shift the

Accepted Answer

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

Question 7

Explain the ripple effects of a sale of government bonds in an open market operation.

Accepted Answer

The Fed's actions ripple through the eco

Question 8

-The figure above shows the market for bank reserves in Futureland. If the Bank of Futureland undertakes an open market sale of government securities that changes the quantity of reserves by
$100 billion, then the federal funds rate will .

Accepted Answer

A)  fall to 4 percent a year 
B)  remain at 6 percent a year 
C)  rise to 8 percent a year 
D)  None of the above answers is correct. 
A)  fall to 4 percent a year 
B)  remain at 6 percent a year 
C)  rise to 8 percent a year 
D)  None of the above answers is correct.

Question 9

A rise in the federal funds rate

Accepted Answer

A)  lowers the long- term real interest rate. 
B)  may raise or lower the long- term real interest rate, depending on whether the demand for loanable funds curve has a negative or a positive slope. 
C)  does not change the long- term real interest rate. 
D)  raises the long- term real interest rate. 
A)  lowers the long- term real interest rate. 
B)  may raise or lower the long- term real interest rate, depending on whether the demand for loanable funds curve has a negative or a positive slope. 
C)  does not change the long- term real interest rate. 
D)  raises the long- term real interest rate.

Question 10

In order to combat a recession, the Fed will the federal funds rate thereby the quantity of money.

Accepted Answer

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

Question 11

-In the above figure, if the economy is initially at point a, the short- run effect of a cut in the federal funds rate is given by movement from point

Accepted Answer

A)  a to point b, increasing output and decreasing the unemployment rate. 
B)  a to point c, keeping output and the unemployment rate constant. 
C)  a to point b, increasing output and the unemployment rate. 
D)  a to point d, decreasing output and increasing the unemployment rate. 
A)  a to point b, increasing output and decreasing the unemployment rate. 
B)  a to point c, keeping output and the unemployment rate constant. 
C)  a to point b, increasing output and the unemployment rate. 
D)  a to point d, decreasing output and increasing the unemployment rate.

Question 12

The figure above shows the demand for money in Kiteland.
a) If the Kiteland Central Bank has set the quantity of money so that the equilibrium interest rate is 4 percent, d supply of money curve.
b) Suppose Kiteland's real GDP increases so that the demand for money changes by 100 billion yaks. The Kitela Central Bank takes no actions. Show the effects of this event on your figure. What happens to the interest rate? W happens to the quantity of money in the economy?
c) If the Central Bank wants to prevent the interest rate from changing, what must it do to the quantity of mone Draw the new supply of money curve.
d) In order to change the quantity of money to keep the interest rate constant, suppose the Kiteland Central Ban open market operations. Does it make an open market purchase or an open market sale? Explain your answer.

Accepted Answer

@#IMG-DLM& a) See the figure above. When the deman

Question 13

In the short run, a rise in the federal funds rate the price level and _ real GDP.

Accepted Answer

A)  lowers; does not change 
B)  lowers; decreases 
C)  does not change; increases 
D)  lowers; increases 
A)  lowers; does not change 
B)  lowers; decreases 
C)  does not change; increases 
D)  lowers; increases

Question 14

An increase in the quantity of money lowers the interest rate.

Accepted Answer

A) True 
 B)False

Question 15

If the Fed sells government securities,

Accepted Answer

A)  there will be no effect on the quantity of money. 
B)  commercial bank reserves will decrease. 
C)  commercial bank reserves will increase. 
D)  the government's debt will be decreased. 
A)  there will be no effect on the quantity of money. 
B)  commercial bank reserves will decrease. 
C)  commercial bank reserves will increase. 
D)  the government's debt will be decreased.

Question 16

"When the Fed is concerned with inflation, it buys government securities." Is the previous statement correct or incorrect? Explain your answer.

Accepted Answer

The statement is incorrect. When the Fed

Question 17

Under a k- percent rule, if the economy goes into a expansion, the Fed would

Accepted Answer

A)  increase the quantity of money. 
B)  raise the federal funds rate. 
C)  lower tax rates to keep revenue constant. 
D)  None of the above answers are correct. 
A)  increase the quantity of money. 
B)  raise the federal funds rate. 
C)  lower tax rates to keep revenue constant. 
D)  None of the above answers are correct.

Question 18

When the Fed lowers the federal funds rate,

Accepted Answer

A)  the dollar increases in value on foreign exchange markets. 
B)  investment expenditures increase. 
C)  consumption expenditures decrease. 
D)  net exports decrease. 
A)  the dollar increases in value on foreign exchange markets. 
B)  investment expenditures increase. 
C)  consumption expenditures decrease. 
D)  net exports decrease.

Question 19

-Which aggregate supply- aggregate demand diagram above shows the effect on real GDP and the price level of monetary policy when it is used to fight a recession?

Accepted Answer

A)  Only Figure A 
B)  Only Figure B 
C)  Neither Figure A nor Figure B 
D)  Both Figure A and Figure B 
A)  Only Figure A 
B)  Only Figure B 
C)  Neither Figure A nor Figure B 
D)  Both Figure A and Figure B

Question 20

Monetary policy goals include
I. maximum employment.
II. stable prices
III. moderate long- term interest rates.

Accepted Answer

A)  I and II only. 
B)  I only. 
C)  II only. 
D)  I, II, and III. 
A)  I and II only. 
B)  I only. 
C)  II only. 
D)  I, II, and III.

The sale of government securities by the Fed leads to

If the Fed raises the interest rate, the first effect in an AS/AD figure is a shift of the Curve.

The McCallum rule is an example of

Price level stability

When would the Fed want to carry out a monetary policy that decreases aggregate demand?

In the short run, the Fed's actions to fight an inflationary gap shift the

Explain the ripple effects of a sale of government bonds in an open market operation.

-The figure above shows the market for bank reserves in Futureland. If the Bank of Futureland undertakes an open market sale of government securities that changes the quantity of reserves by $100 billion, then the federal funds rate will .

A rise in the federal funds rate

In order to combat a recession, the Fed will the federal funds rate thereby the quantity of money.

-In the above figure, if the economy is initially at point a, the short- run effect of a cut in the federal funds rate is given by movement from point

In the short run, a rise in the federal funds rate the price level and _ real GDP.

An increase in the quantity of money lowers the interest rate.

If the Fed sells government securities,

"When the Fed is concerned with inflation, it buys government securities." Is the previous statement correct or incorrect? Explain your answer.

Under a k- percent rule, if the economy goes into a expansion, the Fed would

When the Fed lowers the federal funds rate,

-Which aggregate supply- aggregate demand diagram above shows the effect on real GDP and the price level of monetary policy when it is used to fight a recession?

Monetary policy goals include I. maximum employment. II. stable prices III. moderate long- term interest rates.

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 sale of government securities by the Fed leads to

If the Fed raises the interest rate, the first effect in an AS/AD figure is a shift of the Curve.

The McCallum rule is an example of

Price level stability

When would the Fed want to carry out a monetary policy that decreases aggregate demand?

In the short run, the Fed's actions to fight an inflationary gap shift the

Explain the ripple effects of a sale of government bonds in an open market operation.

-The figure above shows the market for bank reserves in Futureland. If the Bank of Futureland undertakes an open market sale of government securities that changes the quantity of reserves by $100 billion, then the federal funds rate will .

A rise in the federal funds rate

In order to combat a recession, the Fed will the federal funds rate thereby the quantity of money.

-In the above figure, if the economy is initially at point a, the short- run effect of a cut in the federal funds rate is given by movement from point

In the short run, a rise in the federal funds rate the price level and _ real GDP.

An increase in the quantity of money lowers the interest rate.

If the Fed sells government securities,

"When the Fed is concerned with inflation, it buys government securities." Is the previous statement correct or incorrect? Explain your answer.

Under a k- percent rule, if the economy goes into a expansion, the Fed would

When the Fed lowers the federal funds rate,

-Which aggregate supply- aggregate demand diagram above shows the effect on real GDP and the price level of monetary policy when it is used to fight a recession?

Monetary policy goals include I. maximum employment. II. stable prices III. moderate long- term interest rates.

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