Question 1

An increase in the demand for money would result from a(n):

Accepted Answer

A)  decrease in nominal GDP. 
B)  decrease in real GDP. 
C)  decrease in the price level. 
D)  increase in the price level. 
A)  decrease in nominal GDP. 
B)  decrease in real GDP. 
C)  decrease in the price level. 
D)  increase in the price level.

Question 2

In the long run, a change in the money supply will affect: I. the interest rate.
II) real GDP.
III) prices.

Accepted Answer

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

Question 3

Use the following to answer questions:
Figure: Monetary Policy and the AD-SRAS Model  
-(Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. If the economy is in a recessionary gap at point f, it could move to point g as a result of:

Accepted Answer

A)  a decrease in government spending. 
B)  an increase in the discount rate. 
C)  a decrease in the money supply. 
D)  purchases of government securities in the open market. 
A)  a decrease in government spending. 
B)  an increase in the discount rate. 
C)  a decrease in the money supply. 
D)  purchases of government securities in the open market.

Question 4

To close a recessionary gap, the central bank could adopt an expansionary economic policy.

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer questions:
Figure: Monetary Policy and the AD-SRAS Model  
-(Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. If the economy is at point h because of an open market purchase by the Federal Reserve and no further monetary policy is implemented, in the long run nominal wages will _____, SRAS will shift _____, real GDP will _____, and the price level will _____.

Accepted Answer

A)  increase; to SRAS'; decrease; increase 
B)  increase; to SRAS'; increase; decrease 
C)  decrease; farther to the right; decrease; increase 
D)  decrease; to SRAS'; increase; decrease 
A)  increase; to SRAS'; decrease; increase 
B)  increase; to SRAS'; increase; decrease 
C)  decrease; farther to the right; decrease; increase 
D)  decrease; to SRAS'; increase; decrease

Question 6

Use the following to answer questions:
Figure: Monetary Policy I  
-(Figure: Monetary Policy I) Refer to Figure: Monetary Policy I. If the economy is initially in equilibrium at E2 and the central bank chooses to buy Treasury bills, _____ shift to _____ a(n) _____ gap.

Accepted Answer

A)  AD2 will; the right, causing; inflationary 
B)  AD2 will; AD1, causing; recessionary 
C)  AD1 will; AD2, closing; recessionary 
D)  AD1 will; the left, increasing; recessionary 
A)  AD2 will; the right, causing; inflationary 
B)  AD2 will; AD1, causing; recessionary 
C)  AD1 will; AD2, closing; recessionary 
D)  AD1 will; the left, increasing; recessionary

Question 7

If the inflation rate is 3% this year, the demand for money will increase by 6% this year.

Accepted Answer

A) True 
 B)False

Question 8

According to the Taylor rule, the target federal funds rate should be positively related to the inflation rate and inversely related to the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 9

If Congress places a $5 tax on each ATM transaction, there will likely be a:

Accepted Answer

A)  movement up a stationary money demand curve. 
B)  movement down a stationary money demand curve. 
C)  shift to the left of the money demand curve. 
D)  shift to the right of the money demand curve. 
A)  movement up a stationary money demand curve. 
B)  movement down a stationary money demand curve. 
C)  shift to the left of the money demand curve. 
D)  shift to the right of the money demand curve.

Question 10

Use the following to answer questions:
Figure: Monetary Policy and the AD-SRAS Model  
-(Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. If the economy is in a recessionary gap at point f, it could move to point g as a result of:

Accepted Answer

A)  a decrease in the money supply. 
B)  a rise in the discount rate. 
C)  an increase in the money supply. 
D)  sales of government securities in the open market. 
A)  a decrease in the money supply. 
B)  a rise in the discount rate. 
C)  an increase in the money supply. 
D)  sales of government securities in the open market.

Question 11

If the Federal Reserve wants to lower the interest rate, it will:

Accepted Answer

A)  decrease the money supply. 
B)  increase the money supply. 
C)  keep the money supply unchanged. 
D)  mandate a lower interest rate. 
A)  decrease the money supply. 
B)  increase the money supply. 
C)  keep the money supply unchanged. 
D)  mandate a lower interest rate.

Question 12

The zero lower bound for interest rates is:

Accepted Answer

A)  the fact that interest rates can't go below zero. 
B)  a theory that says that interest rates should have no bounds or limits. 
C)  a law that prohibits credit unions from paying interest on checkable deposits. 
D)  only a theory that never actually occurs in the real world. 
A)  the fact that interest rates can't go below zero. 
B)  a theory that says that interest rates should have no bounds or limits. 
C)  a law that prohibits credit unions from paying interest on checkable deposits. 
D)  only a theory that never actually occurs in the real world.

Question 13

When the Fed changes tax rates, interest rates change, and this changes real GDP.

Accepted Answer

A) True 
 B)False

Question 14

Use the following to answer questions:
Figure: The Money Supply and Aggregate Demand  
-(Figure: The Money Supply and Aggregate Demand) Refer to Figure: The Money Supply and Aggregate Demand. Panel (b) illustrates what happens when the Federal Reserve decides to _____ the money supply and _____ interest rates.

Accepted Answer

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

Question 15

When the central bank announces the desired inflation rate and sets policy to reach that rate, it is using:

Accepted Answer

A)  monetary neutrality policy. 
B)  the Taylor rule. 
C)  inflation targeting. 
D)  fiscal policy. 
A)  monetary neutrality policy. 
B)  the Taylor rule. 
C)  inflation targeting. 
D)  fiscal policy.

Question 16

A decrease in the demand for money would result from a(n):

Accepted Answer

A)  increase in income. 
B)  decrease in real GDP. 
C)  increase in the price level. 
D)  increase in nominal GDP. 
A)  increase in income. 
B)  decrease in real GDP. 
C)  increase in the price level. 
D)  increase in nominal GDP.

Question 17

Given an inflationary gap, the Federal Reserve will use monetary policy to _____ real GDP and _____ the interest rate.

Accepted Answer

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

Question 18

Between 1970 and 2015, in general, the money supply grew more rapidly in poorer countries than in wealthy ones.

Accepted Answer

A) True 
 B)False

Question 19

If the interest rate is below the equilibrium rate, the:

Accepted Answer

A)  quantity supplied of nonmonetary financial assets is greater than the quantity demanded. 
B)  quantity demanded for nonmonetary financial assets is greater than the quantity supplied. 
C)  quantity of money demanded equals the quantity of money supplied. 
D)  quantity of money supplied is greater than the quantity of money demanded. 
A)  quantity supplied of nonmonetary financial assets is greater than the quantity demanded. 
B)  quantity demanded for nonmonetary financial assets is greater than the quantity supplied. 
C)  quantity of money demanded equals the quantity of money supplied. 
D)  quantity of money supplied is greater than the quantity of money demanded.

Question 20

The Federal Reserve affects interest rates by:

Accepted Answer

A)  setting them with regulations. 
B)  open market operations that shift the money demand curve. 
C)  open market operations that shift the money supply curve. 
D)  changing tax rates. 
A)  setting them with regulations. 
B)  open market operations that shift the money demand curve. 
C)  open market operations that shift the money supply curve. 
D)  changing tax rates.

An increase in the demand for money would result from a(n):

In the long run, a change in the money supply will affect: I. the interest rate. II) real GDP. III) prices.

Use the following to answer questions: Figure: Monetary Policy and the AD-SRAS Model -(Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. If the economy is in a recessionary gap at point f, it could move to point g as a result of:

To close a recessionary gap, the central bank could adopt an expansionary economic policy.

Use the following to answer questions: Figure: Monetary Policy I -(Figure: Monetary Policy I) Refer to Figure: Monetary Policy I. If the economy is initially in equilibrium at E₂ and the central bank chooses to buy Treasury bills, ___ shift to _ a(n) ___ gap.

If the inflation rate is 3% this year, the demand for money will increase by 6% this year.

According to the Taylor rule, the target federal funds rate should be positively related to the inflation rate and inversely related to the unemployment rate.

If Congress places a $5 tax on each ATM transaction, there will likely be a:

Use the following to answer questions: Figure: Monetary Policy and the AD-SRAS Model -(Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. If the economy is in a recessionary gap at point f, it could move to point g as a result of:

If the Federal Reserve wants to lower the interest rate, it will:

The zero lower bound for interest rates is:

When the Fed changes tax rates, interest rates change, and this changes real GDP.

When the central bank announces the desired inflation rate and sets policy to reach that rate, it is using:

A decrease in the demand for money would result from a(n):

Given an inflationary gap, the Federal Reserve will use monetary policy to _ real GDP and _ the interest rate.

Between 1970 and 2015, in general, the money supply grew more rapidly in poorer countries than in wealthy ones.

If the interest rate is below the equilibrium rate, the:

The Federal Reserve affects interest rates by:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 15: Monetary Policy

An increase in the demand for money would result from a(n):

In the long run, a change in the money supply will affect: I. the interest rate. II) real GDP. III) prices.

Use the following to answer questions: Figure: Monetary Policy and the AD-SRAS Model -(Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. If the economy is in a recessionary gap at point f, it could move to point g as a result of:

To close a recessionary gap, the central bank could adopt an expansionary economic policy.

Use the following to answer questions: Figure: Monetary Policy I -(Figure: Monetary Policy I) Refer to Figure: Monetary Policy I. If the economy is initially in equilibrium at E2 and the central bank chooses to buy Treasury bills, _____ shift to _____ a(n) _____ gap.

If the inflation rate is 3% this year, the demand for money will increase by 6% this year.

According to the Taylor rule, the target federal funds rate should be positively related to the inflation rate and inversely related to the unemployment rate.

If Congress places a $5 tax on each ATM transaction, there will likely be a:

Use the following to answer questions: Figure: Monetary Policy and the AD-SRAS Model -(Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. If the economy is in a recessionary gap at point f, it could move to point g as a result of:

If the Federal Reserve wants to lower the interest rate, it will:

The zero lower bound for interest rates is:

When the Fed changes tax rates, interest rates change, and this changes real GDP.

When the central bank announces the desired inflation rate and sets policy to reach that rate, it is using:

A decrease in the demand for money would result from a(n):

Given an inflationary gap, the Federal Reserve will use monetary policy to _____ real GDP and _____ the interest rate.

Between 1970 and 2015, in general, the money supply grew more rapidly in poorer countries than in wealthy ones.

If the interest rate is below the equilibrium rate, the:

The Federal Reserve affects interest rates by:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Use the following to answer questions: Figure: Monetary Policy I -(Figure: Monetary Policy I) Refer to Figure: Monetary Policy I. If the economy is initially in equilibrium at E₂ and the central bank chooses to buy Treasury bills, ___ shift to _ a(n) ___ gap.

Given an inflationary gap, the Federal Reserve will use monetary policy to _ real GDP and _ the interest rate.