Question 1

In response to an inflationary gap, the Fed

Accepted Answer

A)  raises the federal funds rate by selling U.S. government securities 
B)    lowers the federal funds rate by buying U.S. government securities. 
C)  lowers the federal funds rate by buying U.S.    government securities. 
D)  waits until the price level falls before acting. 
A)  raises the federal funds rate by selling U.S. government securities 
B)    lowers the federal funds rate by buying U.S. government securities. 
C)  lowers the federal funds rate by buying U.S.    government securities. 
D)  waits until the price level falls before acting.

Question 2

Discuss how the Fed raising the federal funds rate ripples through the different sectors of the economy.

Accepted Answer

To raise the federal funds rate, the Fed

Question 3

Which of the following is a potential monetary policy instrument for the Fed?

Accepted Answer

A)  government budget deficit 
B)  income tax rates 
C)  federal funds rate 
D)  profit rates 
A)  government budget deficit 
B)  income tax rates 
C)  federal funds rate 
D)  profit rates

Question 4

If the Fed is concerned about inflation, in the short run what is the proper monetary policy to restore price stability? What actions can the Fed undertake to restore price stability?

Accepted Answer

In order to avoid the inflation, the Fed

Question 5

If the Fed wished to eliminate an inflationary gap, which of the following would be an appropriate policy?

Accepted Answer

A)  decease the government budget deficit 
B)  raise the federal funds rate 
C)  lower the federal funds rate 
D)  buy government securities 
A)  decease the government budget deficit 
B)  raise the federal funds rate 
C)  lower the federal funds rate 
D)  buy government securities

Question 6

If the Fed increases the quantity of reserves, the federal funds rate __________and the quantity of money __________.

Accepted Answer

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

Question 7

The higher the federal funds rate, the ___________the opportunity cost of holding reserves, which___________ the incentive to economize on reserves.

Accepted Answer

A)  higher; decreases 
B)  lower; increases 
C)  higher; increases 
D)  lower; decreases 
A)  higher; decreases 
B)  lower; increases 
C)  higher; increases 
D)  lower; decreases

Question 8

When the Fed cuts the Federal funds rate, real GDP growth __________and the inflation rate__________

Accepted Answer

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

Question 9

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

Accepted Answer

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

Question 10

If the Fed wants to fight inflation, it will ____________the federal funds rate, which in the short run shifts the____________ .

Accepted Answer

A)  lower; AD curve leftward 
B)  lower; AD curve rightward 
C)  raise; AD curve rightward 
D)  raise; AD curve leftward 
A)  lower; AD curve leftward 
B)  lower; AD curve rightward 
C)  raise; AD curve rightward 
D)  raise; AD curve leftward

Question 11

In the short-run, lowering the federal funds rate will shift the__________ and__________real GDP.

Accepted Answer

A)  aggregate demand curve rightward; increase 
B)  aggregate demand curve leftward; increase 
C)  aggregate demand curve leftward; decrease 
D)  aggregate supply curve rightward; increase 
A)  aggregate demand curve rightward; increase 
B)  aggregate demand curve leftward; increase 
C)  aggregate demand curve leftward; decrease 
D)  aggregate supply curve rightward; increase

Question 12

The short-run effect of lowering the federal funds rate

Accepted Answer

A)  raises the price level and increases real GDP. 
B)  lowers the price level and decreases real GDP. 
C)  raises the price level and decreases real GDP. 
D)  lowers the price level and increases real GDP. 
A)  raises the price level and increases real GDP. 
B)  lowers the price level and decreases real GDP. 
C)  raises the price level and decreases real GDP. 
D)  lowers the price level and increases real GDP.

Question 13

The federal funds rate is the interest rate

Accepted Answer

A)  banks charge each other on overnight loans. 
B)  also known as the prime rate. 
C)  on the 30-year treasury bond. 
D)  on the 3-month Treasury bill. 
A)  banks charge each other on overnight loans. 
B)  also known as the prime rate. 
C)  on the 30-year treasury bond. 
D)  on the 3-month Treasury bill.

Question 14

The Taylor rule

Accepted Answer

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

Question 15

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

Accepted Answer

The Fedʹs actions ripple through the eco

Question 16

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

Accepted Answer

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

Question 17

-In the above figure, the economy experiences a decrease in aggregate demand so that the aggregate demand curve shifts from AD0 to AD1. If the Fed wants to offset this change, it would____________

Accepted Answer

A)  purchase government securities on the open market 
B)  sell government securities on the open market 
C)  increase government expenditures 
D)  lower taxes 
A)  purchase government securities on the open market 
B)  sell government securities on the open market 
C)  increase government expenditures 
D)  lower taxes

Question 18

To fight a recession the Fed will

Accepted Answer

A)  lower the federal funds rate. 
B)  decrease taxes. 
C)  increase the budget deficit. 
D)  raise the federal funds rate. 
A)  lower the federal funds rate. 
B)  decrease taxes. 
C)  increase the budget deficit. 
D)  raise the federal funds rate.

Question 19

Equilibrium in the market for bank reserves determines the

Accepted Answer

A)  30-year Treasury bond rate. 
B)  federal funds rate. 
C)  inflation rate. 
D)  exchange rate. 
A)  30-year Treasury bond rate. 
B)  federal funds rate. 
C)  inflation rate. 
D)  exchange rate.

Question 20

If the federal funds rate is greater than the federal funds rate target, there is a___________of reserves and the federal funds rate___________ .

Accepted Answer

A)  shortage; falls 
B)  surplus; rises 
C)  surplus; falls 
D)  shortage; rises 
A)  shortage; falls 
B)  surplus; rises 
C)  surplus; falls 
D)  shortage; rises

In response to an inflationary gap, the Fed

Discuss how the Fed raising the federal funds rate ripples through the different sectors of the economy.

Which of the following is a potential monetary policy instrument for the Fed?

If the Fed is concerned about inflation, in the short run what is the proper monetary policy to restore price stability? What actions can the Fed undertake to restore price stability?

If the Fed wished to eliminate an inflationary gap, which of the following would be an appropriate policy?

If the Fed increases the quantity of reserves, the federal funds rate and the quantity of money .

The higher the federal funds rate, the _the opportunity cost of holding reserves, which_ the incentive to economize on reserves.

When the Fed cuts the Federal funds rate, real GDP growth and the inflation rate

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

If the Fed wants to fight inflation, it will the federal funds rate, which in the short run shifts the .

In the short-run, lowering the federal funds rate will shift the andreal GDP.

The short-run effect of lowering the federal funds rate

The federal funds rate is the interest rate

The Taylor rule

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

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

-In the above figure, the economy experiences a decrease in aggregate demand so that the aggregate demand curve shifts from AD₀to AD₁. If the Fed wants to offset this change, it would____________

To fight a recession the Fed will

Equilibrium in the market for bank reserves determines the

If the federal funds rate is greater than the federal funds rate target, there is a_of reserves and the federal funds rate_ .

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

International Trade Policy

Review

Filters

Exam 14: Monetary Policy

In response to an inflationary gap, the Fed

Discuss how the Fed raising the federal funds rate ripples through the different sectors of the economy.

Which of the following is a potential monetary policy instrument for the Fed?

If the Fed is concerned about inflation, in the short run what is the proper monetary policy to restore price stability? What actions can the Fed undertake to restore price stability?

If the Fed wished to eliminate an inflationary gap, which of the following would be an appropriate policy?

If the Fed increases the quantity of reserves, the federal funds rate __________and the quantity of money __________.

The higher the federal funds rate, the ___________the opportunity cost of holding reserves, which___________ the incentive to economize on reserves.

When the Fed cuts the Federal funds rate, real GDP growth __________and the inflation rate__________

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

If the Fed wants to fight inflation, it will ____________the federal funds rate, which in the short run shifts the____________ .

In the short-run, lowering the federal funds rate will shift the__________ and__________real GDP.

The short-run effect of lowering the federal funds rate

The federal funds rate is the interest rate

The Taylor rule

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

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

-In the above figure, the economy experiences a decrease in aggregate demand so that the aggregate demand curve shifts from AD0 to AD1. If the Fed wants to offset this change, it would____________

To fight a recession the Fed will

Equilibrium in the market for bank reserves determines the

If the federal funds rate is greater than the federal funds rate target, there is a___________of reserves and the federal funds rate___________ .

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: the Keynesian Model

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

International Trade Policy

Review

Filters

If the Fed increases the quantity of reserves, the federal funds rate and the quantity of money .

The higher the federal funds rate, the _the opportunity cost of holding reserves, which_ the incentive to economize on reserves.

When the Fed cuts the Federal funds rate, real GDP growth and the inflation rate

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

If the Fed wants to fight inflation, it will the federal funds rate, which in the short run shifts the .

In the short-run, lowering the federal funds rate will shift the andreal GDP.

-In the above figure, the economy experiences a decrease in aggregate demand so that the aggregate demand curve shifts from AD₀to AD₁. If the Fed wants to offset this change, it would____________

If the federal funds rate is greater than the federal funds rate target, there is a_of reserves and the federal funds rate_ .