Question 1

Expansionary monetary policy may decrease investment spending.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the supply of money will lead to a(n) _____ in the equilibrium interest rate and a(n) _____ in real GDP.

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 3

A contractionary monetary policy is appropriate during an expansion.

Accepted Answer

A) True 
 B)False

Question 4

A contractionary monetary policy is appropriate during a recession.

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer questions:
Figure: Monetary Policy III  
-(Figure: Monetary Policy III) Refer to Figure: Monetary Policy III. The central bank should adopt policies to move the economy to:

Accepted Answer

A)  Y1. 
B)  Y2. 
C)  Y3. 
D)  Y4. 
A)  Y1. 
B)  Y2. 
C)  Y3. 
D)  Y4.

Question 6

The liquidity preference model focuses on interest rates in the short run.

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer questions:
Figure: Short-Run Determination of the Interest Rate  
-(Figure: Short-Run Determination of the Interest Rate) Refer to Figure: Short-Run Determination of the Interest Rate. If the money supply is at MS1 and the central bank buys Treasury bills, then in the short run the interest rate will:

Accepted Answer

A)  increase above r1. 
B)  remain at r1. 
C)  decrease to r2. 
D)  fluctuate randomly. 
A)  increase above r1. 
B)  remain at r1. 
C)  decrease to r2. 
D)  fluctuate randomly.

Question 8

According to the liquidity preference model, the equilibrium interest rate is determined by the:

Accepted Answer

A)  supply of and demand for loanable funds. 
B)  supply of and demand for money. 
C)  level of investment spending and saving. 
D)  International Monetary Fund. 
A)  supply of and demand for loanable funds. 
B)  supply of and demand for money. 
C)  level of investment spending and saving. 
D)  International Monetary Fund.

Question 9

An increase in interest rates causes the demand for money to:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  shift to the right. 
A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  shift to the right.

Question 10

In the short run, the interest rate is determined in the _____ market.

Accepted Answer

A)  stock 
B)  money 
C)  loanable funds 
D)  commodity 
A)  stock 
B)  money 
C)  loanable funds 
D)  commodity

Question 11

The short-term interest rate applies to financial assets that mature:

Accepted Answer

A)  in less than a year. 
B)  within a year or more. 
C)  within 2 years. 
D)  within 5 years. 
A)  in less than a year. 
B)  within a year or more. 
C)  within 2 years. 
D)  within 5 years.

Question 12

As of 2017, Janet Yellen is the chair of the Board of Governors of the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 13

To fight inflation, the Federal Reserve should conduct _____ monetary policy to _____ interest rates, which will shift the aggregate demand curve to the _____.

Accepted Answer

A)  contractionary; raise; left 
B)  contractionary; raise; right 
C)  expansionary; lower; right 
D)  expansionary; raise; left 
A)  contractionary; raise; left 
B)  contractionary; raise; right 
C)  expansionary; lower; right 
D)  expansionary; raise; left

Question 14

If interest rates rise, there will be a(n):

Accepted Answer

A)  decrease in aggregate demand. 
B)  increase in aggregate demand. 
C)  increase in aggregate supply. 
D)  increase in the money supply. 
A)  decrease in aggregate demand. 
B)  increase in aggregate demand. 
C)  increase in aggregate supply. 
D)  increase in the money supply.

Question 15

Use the following to answer questions:
Figure: Monetary Policy III  
-(Figure: Monetary Policy III) Refer to Figure: Monetary Policy III. Expansionary monetary policy will lead to an equilibrium price level of:

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 16

In the long run, changes in the money supply will change prices, real GDP, and interest rates.

Accepted Answer

A) True 
 B)False

Question 17

The chair of the Board of Governors during the 2008 financial crisis was:

Accepted Answer

A)  Barack Obama. 
B)  Ben Bernanke. 
C)  J. P. Morgan. 
D)  John McCain. 
A)  Barack Obama. 
B)  Ben Bernanke. 
C)  J. P. Morgan. 
D)  John McCain.

Question 18

The interest earnings one gives up to hold more liquid assets are a(n):

Accepted Answer

A)  opportunity cost. 
B)  transaction cost. 
C)  asset of the company. 
D)  liability of the company. 
A)  opportunity cost. 
B)  transaction cost. 
C)  asset of the company. 
D)  liability of the company.

Question 19

An increase in the supply of money will lead to a(n) _____ in equilibrium real GDP and a _____ equilibrium interest rate.

Accepted Answer

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

Question 20

Contractionary monetary policy:

Accepted Answer

A)  increases aggregate demand. 
B)  increases aggregate supply. 
C)  works by discouraging investment spending. 
D)  decreases interest rates. 
A)  increases aggregate demand. 
B)  increases aggregate supply. 
C)  works by discouraging investment spending. 
D)  decreases interest rates.

Expansionary monetary policy may decrease investment spending.

An increase in the supply of money will lead to a(n) _ in the equilibrium interest rate and a(n) _ in real GDP.

A contractionary monetary policy is appropriate during an expansion.

A contractionary monetary policy is appropriate during a recession.

Use the following to answer questions: Figure: Monetary Policy III -(Figure: Monetary Policy III) Refer to Figure: Monetary Policy III. The central bank should adopt policies to move the economy to:

The liquidity preference model focuses on interest rates in the short run.

According to the liquidity preference model, the equilibrium interest rate is determined by the:

An increase in interest rates causes the demand for money to:

In the short run, the interest rate is determined in the _____ market.

The short-term interest rate applies to financial assets that mature:

As of 2017, Janet Yellen is the chair of the Board of Governors of the Federal Reserve.

To fight inflation, the Federal Reserve should conduct ___ monetary policy to _ interest rates, which will shift the aggregate demand curve to the ___.

If interest rates rise, there will be a(n):

Use the following to answer questions: Figure: Monetary Policy III -(Figure: Monetary Policy III) Refer to Figure: Monetary Policy III. Expansionary monetary policy will lead to an equilibrium price level of:

In the long run, changes in the money supply will change prices, real GDP, and interest rates.

The chair of the Board of Governors during the 2008 financial crisis was:

The interest earnings one gives up to hold more liquid assets are a(n):

An increase in the supply of money will lead to a(n) _ in equilibrium real GDP and a _ equilibrium interest rate.

Contractionary monetary policy:

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

Expansionary monetary policy may decrease investment spending.

An increase in the supply of money will lead to a(n) _____ in the equilibrium interest rate and a(n) _____ in real GDP.

A contractionary monetary policy is appropriate during an expansion.

A contractionary monetary policy is appropriate during a recession.

Use the following to answer questions: Figure: Monetary Policy III -(Figure: Monetary Policy III) Refer to Figure: Monetary Policy III. The central bank should adopt policies to move the economy to:

The liquidity preference model focuses on interest rates in the short run.

According to the liquidity preference model, the equilibrium interest rate is determined by the:

An increase in interest rates causes the demand for money to:

In the short run, the interest rate is determined in the _____ market.

The short-term interest rate applies to financial assets that mature:

As of 2017, Janet Yellen is the chair of the Board of Governors of the Federal Reserve.

To fight inflation, the Federal Reserve should conduct _____ monetary policy to _____ interest rates, which will shift the aggregate demand curve to the _____.

If interest rates rise, there will be a(n):

Use the following to answer questions: Figure: Monetary Policy III -(Figure: Monetary Policy III) Refer to Figure: Monetary Policy III. Expansionary monetary policy will lead to an equilibrium price level of:

In the long run, changes in the money supply will change prices, real GDP, and interest rates.

The chair of the Board of Governors during the 2008 financial crisis was:

The interest earnings one gives up to hold more liquid assets are a(n):

An increase in the supply of money will lead to a(n) _____ in equilibrium real GDP and a _____ equilibrium interest rate.

Contractionary monetary policy:

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

An increase in the supply of money will lead to a(n) _ in the equilibrium interest rate and a(n) _ in real GDP.

To fight inflation, the Federal Reserve should conduct ___ monetary policy to _ interest rates, which will shift the aggregate demand curve to the ___.

An increase in the supply of money will lead to a(n) _ in equilibrium real GDP and a _ equilibrium interest rate.