Question 1

Which of the following monetary policies raises aggregate demand and output?

Accepted Answer

A) An open market sale of government securities 
B) An increase in the federal funds rate 
C) An increase in the discount rate 
D) A cut in the reserve requirement 
A) An open market sale of government securities 
B) An increase in the federal funds rate 
C) An increase in the discount rate 
D) A cut in the reserve requirement D

Question 2

The group that is comprised of five presidents of Fed regional banks and seven Fed governors that gathers around a table to discuss whether to increase interest rates is the:

Accepted Answer

A) Federal Open Market Committee. 
B) Federal Depository Insurance Corporation. 
C) Federal Advisory Council. 
D) National Federal Reserve Bank. 
A) Federal Open Market Committee. 
B) Federal Depository Insurance Corporation. 
C) Federal Advisory Council. 
D) National Federal Reserve Bank. A

Question 3

If the Fed wants to implement expansionary monetary policy, it might:

Accepted Answer

A) sell government securities to increase the federal funds rate. 
B) sell government securities to reduce the federal funds rate. 
C) buy government securities to increase the federal funds rate. 
D) buy government securities to reduce the federal funds rate. 
A) sell government securities to increase the federal funds rate. 
B) sell government securities to reduce the federal funds rate. 
C) buy government securities to increase the federal funds rate. 
D) buy government securities to reduce the federal funds rate. D

Question 4

If the Fed increases the required reserves, financial institutions would be expected to lend out:

Accepted Answer

A) more than before, increasing the money supply. 
B) less than before, decreasing the money supply. 
C) more than before, decreasing the money supply. 
D) less than before, increasing the money supply. 
A) more than before, increasing the money supply. 
B) less than before, decreasing the money supply. 
C) more than before, decreasing the money supply. 
D) less than before, increasing the money supply.

Question 5

The central bank in the United States does all the following except:

Accepted Answer

A) act as a financial adviser to the government. 
B) loan money to corporations. 
C) loan money to banks. 
D) issue coin and currency. 
A) act as a financial adviser to the government. 
B) loan money to corporations. 
C) loan money to banks. 
D) issue coin and currency.

Question 6

In the AS/AD model, in the short run, monetary policy affects:

Accepted Answer

A) only inflation. 
B) only real output. 
C) both inflation and real output. 
D) neither inflation nor real output. 
A) only inflation. 
B) only real output. 
C) both inflation and real output. 
D) neither inflation nor real output.

Question 7

If individuals suddenly increase their withdrawals from the banking system, the federal funds rate should:

Accepted Answer

A) increase as bank reserves decline. 
B) decrease as bank reserves decline. 
C) increase as bank reserves increase. 
D) decrease as bank reserves increase. 
A) increase as bank reserves decline. 
B) decrease as bank reserves decline. 
C) increase as bank reserves increase. 
D) decrease as bank reserves increase.

Question 8

One of the reasons that expansionary monetary policy has not been as effective as expected in recent years is that:

Accepted Answer

A) the fed funds rate was high. 
B) banks were holding significant excess reserves. 
C) Congress continued to run deficits. 
D) potential output was rising quickly. 
A) the fed funds rate was high. 
B) banks were holding significant excess reserves. 
C) Congress continued to run deficits. 
D) potential output was rising quickly.

Question 9

There are seven Governors of the Federal Reserve, who are appointed for terms of:

Accepted Answer

A) 5 years. 
B) 10 years. 
C) 14 years. 
D) 17 years. 
A) 5 years. 
B) 10 years. 
C) 14 years. 
D) 17 years.

Question 10

Give examples of central banks in two other countries and briefly explain how their conduct of monetary policy differs from the Fed.

Accepted Answer

(Any two of the following)
The European

Question 11

A difference between a monetary regime and monetary policy is that a monetary regime:

Accepted Answer

A) is a predetermined response while a monetary policy has more flexibility. 
B) has more flexibility while monetary policy is a predetermined response. 
C) depends on the economic conditions while the monetary policy does not. 
D) is not favored while monetary policy is. 
A) is a predetermined response while a monetary policy has more flexibility. 
B) has more flexibility while monetary policy is a predetermined response. 
C) depends on the economic conditions while the monetary policy does not. 
D) is not favored while monetary policy is.

Question 12

The Taylor Rule relates changes in the money supply to changes in interest rates.

Accepted Answer

A) True 
 B)False

Question 13

When the Fed decreases the reserve requirement, the money supply is expected to:

Accepted Answer

A) expand and the money multiplier contract. 
B) expand, as is the money multiplier. 
C) contract, as is the money multiplier. 
D) contract and the money multiplier expand. 
A) expand and the money multiplier contract. 
B) expand, as is the money multiplier. 
C) contract, as is the money multiplier. 
D) contract and the money multiplier expand.

Question 14

The Fed's duties include acting as a lender of last resort and supervising or regulating a variety of financial institutions.

Accepted Answer

A) True 
 B)False

Question 15

If inflation is one percentage point above the Fed's target, the Taylor rule predicts that the Fed should:

Accepted Answer

A) raise the federal funds rate by 0.5 percentage points. 
B) raise the federal funds rate by 1.0 percentage points. 
C) reduce the federal funds rate by 1.5 percentage points. 
D) reduce the federal funds rate by 1.0 percentage points. 
A) raise the federal funds rate by 0.5 percentage points. 
B) raise the federal funds rate by 1.0 percentage points. 
C) reduce the federal funds rate by 1.5 percentage points. 
D) reduce the federal funds rate by 1.0 percentage points.

Question 16

Refer to the graph shown. Monetary policy that shifts the AD curve from AD0 to AD1 and moves the economy from A to B:

Accepted Answer

A) increases nominal output but not real output in the short run. 
B) increases both real and nominal output in the short run. 
C) increases real output but not nominal output in the short run. 
D) doesn't increase real or nominal output in the short run. 
A) increases nominal output but not real output in the short run. 
B) increases both real and nominal output in the short run. 
C) increases real output but not nominal output in the short run. 
D) doesn't increase real or nominal output in the short run.

Question 17

The monetary base includes:

Accepted Answer

A) currency and coin in circulation plus checkable deposits. 
B) currency and coin in circulation only. 
C) vault cash plus checkable deposits. 
D) currency and cash plus commercial bank deposits at the Fed. 
A) currency and coin in circulation plus checkable deposits. 
B) currency and coin in circulation only. 
C) vault cash plus checkable deposits. 
D) currency and cash plus commercial bank deposits at the Fed.

Question 18

Explain how the Fed influences the Federal Funds rate.

Accepted Answer

The Federal Reserve influences the Feder

Question 19

In the AS/AD model, an expansionary monetary policy has the greatest effect on the price level when it:

Accepted Answer

A) increases both nominal and real income. 
B) increases real income but not nominal income. 
C) increases nominal income but not real income. 
D) doesn't increase real or nominal income. 
A) increases both nominal and real income. 
B) increases real income but not nominal income. 
C) increases nominal income but not real income. 
D) doesn't increase real or nominal income.

Question 20

How has the payment of interest on reserves changed the conduct of monetary policy?

Accepted Answer

Since banks now receive interest when th

Exam 29: Monetary Policy

Which of the following monetary policies raises aggregate demand and output?

The group that is comprised of five presidents of Fed regional banks and seven Fed governors that gathers around a table to discuss whether to increase interest rates is the:

If the Fed wants to implement expansionary monetary policy, it might:

If the Fed increases the required reserves, financial institutions would be expected to lend out:

The central bank in the United States does all the following except:

In the AS/AD model, in the short run, monetary policy affects:

If individuals suddenly increase their withdrawals from the banking system, the federal funds rate should:

One of the reasons that expansionary monetary policy has not been as effective as expected in recent years is that:

There are seven Governors of the Federal Reserve, who are appointed for terms of:

Give examples of central banks in two other countries and briefly explain how their conduct of monetary policy differs from the Fed.

A difference between a monetary regime and monetary policy is that a monetary regime:

The Taylor Rule relates changes in the money supply to changes in interest rates.

When the Fed decreases the reserve requirement, the money supply is expected to:

The Fed's duties include acting as a lender of last resort and supervising or regulating a variety of financial institutions.

If inflation is one percentage point above the Fed's target, the Taylor rule predicts that the Fed should:

Refer to the graph shown. Monetary policy that shifts the AD curve from AD0 to AD1 and moves the economy from A to B:

The monetary base includes:

Explain how the Fed influences the Federal Funds rate.

In the AS/AD model, an expansionary monetary policy has the greatest effect on the price level when it:

How has the payment of interest on reserves changed the conduct of monetary policy?

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters

Refer to the graph shown. Monetary policy that shifts the AD curve from AD₀ to AD₁ and moves the economy from A to B: