Question 1

The exchange rate is

Accepted Answer

A)  the rate at which banks can borrow from the Fed. 
B)  the slope of the investment function. 
C)  the price at which one currency trades for another currency. 
D)  the rate at which one can translate money into consumption goods. 
A)  the rate at which banks can borrow from the Fed. 
B)  the slope of the investment function. 
C)  the price at which one currency trades for another currency. 
D)  the rate at which one can translate money into consumption goods.

Question 2

If the Federal Reserve conducts an open market purchase, the

Accepted Answer

A)  interest rate will not change. 
B)  interest rate will increase. 
C)  interest rate will decrease. 
D)  money supply is decreased. 
A)  interest rate will not change. 
B)  interest rate will increase. 
C)  interest rate will decrease. 
D)  money supply is decreased.

Question 3

An open market sale by the Fed

Accepted Answer

A)  increases the money supply and increases output. 
B)  increases the money supply and decreases output. 
C)  decreases the money supply and increases output. 
D)  decreases the money supply and decreases output. 
A)  increases the money supply and increases output. 
B)  increases the money supply and decreases output. 
C)  decreases the money supply and increases output. 
D)  decreases the money supply and decreases output.

Question 4

From time to time, the Federal Reserve buys back government bonds from the private sector through a process called

Accepted Answer

A)  bond recall procedures. 
B)  open market purchases. 
C)  backflip bond investments. 
D)  voluntary redemption procedures. 
A)  bond recall procedures. 
B)  open market purchases. 
C)  backflip bond investments. 
D)  voluntary redemption procedures.

Question 5

Banks can obtain funds to make loans by borrowing reserves from other banks through the federal funds market.

Accepted Answer

A) True 
 B)False

Question 6

If the monthly unemployment rate increase mentioned in the Application wound up being a permanent and not temporary change, the best economic decision by the committee would most likely be to

Accepted Answer

A)  increase the money supply to stimulate the economy. 
B)  decrease the money supply to stimulate the economy. 
C)  decrease the money supply to slow the economy down. 
D)  not change monetary policy. 
A)  increase the money supply to stimulate the economy. 
B)  decrease the money supply to stimulate the economy. 
C)  decrease the money supply to slow the economy down. 
D)  not change monetary policy.

Question 7

The rate of interest charged to commercial banks by the Fed for loans is called the ________ rate.

Accepted Answer

A)  federal funds 
B)  discount 
C)  prime 
D)  commercial paper 
A)  federal funds 
B)  discount 
C)  prime 
D)  commercial paper

Question 8

Recall the Application about the Fed's expanded involvement in the economy following the financial crisis in 2008 to answer the following question(s).
-According to the Application, in 2010 the Fed

Accepted Answer

A)  the Fed ended its support of the mortgage market. 
B)  the Fed converted all its assets to cash. 
C)  held over $1 trillion in mortgage-backed securities. 
D)  stopped trading in Treasury securities. 
A)  the Fed ended its support of the mortgage market. 
B)  the Fed converted all its assets to cash. 
C)  held over $1 trillion in mortgage-backed securities. 
D)  stopped trading in Treasury securities.

Question 9

Actions by the Federal Reserve to influence the level of GDP are known as

Accepted Answer

A)  monetary policy. 
B)  fiscal policy. 
C)  cyclical policy. 
D)  procyclical policy. 
A)  monetary policy. 
B)  fiscal policy. 
C)  cyclical policy. 
D)  procyclical policy.

Question 10

What would be a way for the Federal Reserve to slow down the economy when it is growing too quickly or is inflationary?

Accepted Answer

A)  print more money 
B)  buy back government bonds on the open market 
C)  sell more government bonds 
D)  encourage the stock market 
A)  print more money 
B)  buy back government bonds on the open market 
C)  sell more government bonds 
D)  encourage the stock market

Question 11

Describe the channels through which open market purchases by the Fed affects output in an open economy.

Accepted Answer

Open market purchases lead to a increase

Question 12

When the Fed ________ interest rates, bond prices ________.

Accepted Answer

A)  raises; rise 
B)  lowers; rise 
C)  raises; do not change 
D)  lowers; do not change 
A)  raises; rise 
B)  lowers; rise 
C)  raises; do not change 
D)  lowers; do not change

Question 13

Equilibrium in the money market occurs when

Accepted Answer

A)  the quantity of money demanded equals the quantity of money supplied. 
B)  the quantity of money demanded is less than the quantity of money supplied. 
C)  the quantity of money demanded is more than the quantity of money supplied. 
D)  the interest rate equals the money supply. 
A)  the quantity of money demanded equals the quantity of money supplied. 
B)  the quantity of money demanded is less than the quantity of money supplied. 
C)  the quantity of money demanded is more than the quantity of money supplied. 
D)  the interest rate equals the money supply.

Question 14

Recall the Application about the possible link between the value of the U.S. dollar and the worldwide increase in commodity prices to answer the following question(s). Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom.
-Recall the Application. The rise in commodity prices corresponded with ________ in interest rates, and this change in interest rates would result in bond prices ________.

Accepted Answer

A)  an increase; falling 
B)  an increase; rising 
C)  a decrease; falling 
D)  a decrease; rising 
A)  an increase; falling 
B)  an increase; rising 
C)  a decrease; falling 
D)  a decrease; rising

Question 15

An open market purchase by the Fed

Accepted Answer

A)  increases the total amount of reserves in the banking system. 
B)  decreases the total amount of reserves in the banking system. 
C)  does not change the total amount of reserves in the banking system. 
D)  causes the reserve requirement to fall. 
A)  increases the total amount of reserves in the banking system. 
B)  decreases the total amount of reserves in the banking system. 
C)  does not change the total amount of reserves in the banking system. 
D)  causes the reserve requirement to fall.

Question 16

What impact would the Fed's raising the interest rate have on any inflationary pressure in the economy?

Accepted Answer

A)  An increase in interest rates decreases the money demand, which could slow increases in the price level. 
B)  An increase in interest rates increases the money supply, which could cause the price level to increase. 
C)  An increase in interest rates decreases the exchange rate, which causes net exports to rise, generating inflation. 
D)  An increase in interest rates increases real GDP, which creates inflation in an economy. 
A)  An increase in interest rates decreases the money demand, which could slow increases in the price level. 
B)  An increase in interest rates increases the money supply, which could cause the price level to increase. 
C)  An increase in interest rates decreases the exchange rate, which causes net exports to rise, generating inflation. 
D)  An increase in interest rates increases real GDP, which creates inflation in an economy.

Question 17

The Fed has immense power and there are no limits to the extent to which it can effectively control the economy.

Accepted Answer

A) True 
 B)False

Question 18

A decrease in the discount rate will

Accepted Answer

A)  decrease the money supply. 
B)  not affect the money supply. 
C)  increase the money supply. 
D)  have an unclear effect on the money supply. 
A)  decrease the money supply. 
B)  not affect the money supply. 
C)  increase the money supply. 
D)  have an unclear effect on the money supply.

Question 19

What is the "good news" and the "bad news" about a lower value of the U.S. dollar?

Accepted Answer

The "good news" about a lower value of t

Question 20

Explain the three different types of money demand.

Accepted Answer

Transaction demand refers to the demand

The exchange rate is

If the Federal Reserve conducts an open market purchase, the

An open market sale by the Fed

From time to time, the Federal Reserve buys back government bonds from the private sector through a process called

Banks can obtain funds to make loans by borrowing reserves from other banks through the federal funds market.

If the monthly unemployment rate increase mentioned in the Application wound up being a permanent and not temporary change, the best economic decision by the committee would most likely be to

The rate of interest charged to commercial banks by the Fed for loans is called the ________ rate.

Recall the Application about the Fed's expanded involvement in the economy following the financial crisis in 2008 to answer the following question(s). -According to the Application, in 2010 the Fed

Actions by the Federal Reserve to influence the level of GDP are known as

What would be a way for the Federal Reserve to slow down the economy when it is growing too quickly or is inflationary?

Describe the channels through which open market purchases by the Fed affects output in an open economy.

When the Fed interest rates, bond prices .

Equilibrium in the money market occurs when

An open market purchase by the Fed

What impact would the Fed's raising the interest rate have on any inflationary pressure in the economy?

The Fed has immense power and there are no limits to the extent to which it can effectively control the economy.

A decrease in the discount rate will

What is the "good news" and the "bad news" about a lower value of the U.S. dollar?

Explain the three different types of money demand.

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 14: The Federal Reserve and Monetary Policy

The exchange rate is

If the Federal Reserve conducts an open market purchase, the

An open market sale by the Fed

From time to time, the Federal Reserve buys back government bonds from the private sector through a process called

Banks can obtain funds to make loans by borrowing reserves from other banks through the federal funds market.

If the monthly unemployment rate increase mentioned in the Application wound up being a permanent and not temporary change, the best economic decision by the committee would most likely be to

The rate of interest charged to commercial banks by the Fed for loans is called the ________ rate.

Recall the Application about the Fed's expanded involvement in the economy following the financial crisis in 2008 to answer the following question(s). -According to the Application, in 2010 the Fed

Actions by the Federal Reserve to influence the level of GDP are known as

What would be a way for the Federal Reserve to slow down the economy when it is growing too quickly or is inflationary?

Describe the channels through which open market purchases by the Fed affects output in an open economy.

When the Fed ________ interest rates, bond prices ________.

Equilibrium in the money market occurs when

An open market purchase by the Fed

What impact would the Fed's raising the interest rate have on any inflationary pressure in the economy?

The Fed has immense power and there are no limits to the extent to which it can effectively control the economy.

A decrease in the discount rate will

What is the "good news" and the "bad news" about a lower value of the U.S. dollar?

Explain the three different types of money demand.

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

When the Fed interest rates, bond prices .