Question 1

The core inflation rate, measured by the core PCE deflator, measures changes in the

Accepted Answer

A)  price of only two consumer goods: food and fuel. 
B)  prices of all consumer goods. 
C)  prices of consumer goods except the ones for food and fuel. 
D)  prices of consumer goods except the ones for health care. 
A)  price of only two consumer goods: food and fuel. 
B)  prices of all consumer goods. 
C)  prices of consumer goods except the ones for food and fuel. 
D)  prices of consumer goods except the ones for health care.

Question 2

Suppose that the equilibrium real interest rate is 2 percent per year, inflation is 2.5 percent and the output gap is 1 percent. Using the Taylor rule, what is the federal funds rate?

Accepted Answer

A)  3 percent 
B)  3.5 percent 
C)  5.25 percent 
D)  5.5 percent 
A)  3 percent 
B)  3.5 percent 
C)  5.25 percent 
D)  5.5 percent

Question 3

In March 2013 the Fed announced that it might decrease its open market purchases of securities by the end of the year. This announcement suggests that the Fed is concerned that

Accepted Answer

A)  the unemployment rate will increase. 
B)  the inflation rate will rise. 
C)  the federal funds interest rate will fall too low for the Fed to control it. 
D)  the federal funds interest rate will rise too high for the Fed to control it. 
A)  the unemployment rate will increase. 
B)  the inflation rate will rise. 
C)  the federal funds interest rate will fall too low for the Fed to control it. 
D)  the federal funds interest rate will rise too high for the Fed to control it.

Question 4

The monetary policy instrument the Federal Reserve chooses to use is the

Accepted Answer

A)  quantity of money. 
B)  exchange rate. 
C)  federal funds rate. 
D)  required reserves rate. 
A)  quantity of money. 
B)  exchange rate. 
C)  federal funds rate. 
D)  required reserves rate.

Question 5

The Fed engages in open market operations and sells government securities. As long as the federal funds rate stays in the corridor, the result is

Accepted Answer

A)  a lower federal funds rate. 
B)  a higher federal funds rate. 
C)  an unchanged federal funds rate because other interest rates did not change. 
D)  More information is needed to determine what happens to the federal funds rate. 
A)  a lower federal funds rate. 
B)  a higher federal funds rate. 
C)  an unchanged federal funds rate because other interest rates did not change. 
D)  More information is needed to determine what happens to the federal funds rate.

Question 6

The key goal of monetary policy is to

Accepted Answer

A)  reverse the productivity growth slowdown. 
B)  keep the budget deficit small and/or the budget surplus large. 
C)  lower taxes. 
D)  maintain low inflation. 
A)  reverse the productivity growth slowdown. 
B)  keep the budget deficit small and/or the budget surplus large. 
C)  lower taxes. 
D)  maintain low inflation.

Question 7

In the short run, the Fed's actions to fight inflation shift the aggregate demand curve leftward.

Accepted Answer

A) True 
 B)False

Question 8

The Fed buys U.S. government securities from banks in order to

Accepted Answer

A)  lower the federal funds rate. 
B)  reduce the government's budget deficit. 
C)  decrease banks' reserves. 
D)  None of the above answers are correct. 
A)  lower the federal funds rate. 
B)  reduce the government's budget deficit. 
C)  decrease banks' reserves. 
D)  None of the above answers are correct.

Question 9

The Federal Open Market Committee meets ________ times per year.

Accepted Answer

A)  8 
B)  2 
C)  26 
D)  52 
A)  8 
B)  2 
C)  26 
D)  52

Question 10

The Federal Reserve's monetary policy goals include

Accepted Answer

A)  ensuring banks can meet their profit maximization objectives. 
B)  discount rate stability. 
C)  zero percent unemployment in the domestic economy. 
D)  price level stability. 
A)  ensuring banks can meet their profit maximization objectives. 
B)  discount rate stability. 
C)  zero percent unemployment in the domestic economy. 
D)  price level stability.

Question 11

If the Fed lowers the federal funds rate so that the exchange rate falls, then imports ________ and exports ________.

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 12

A decrease in the federal funds rate leads to

Accepted Answer

A)  an increase in the quantity of money. 
B)  a fall in the exchange rate. 
C)  an increase in exports. 
D)  All of the above answers are correct. 
A)  an increase in the quantity of money. 
B)  a fall in the exchange rate. 
C)  an increase in exports. 
D)  All of the above answers are correct.

Question 13

List and briefly explain the steps in how monetary policy affects real GDP in the AS/AD model. Tell what the impact is when the Fed eases monetary policy to fight a recession.

Accepted Answer

There are several steps. Step one is a c

Question 14

Does an open market operation in which the Fed buys securities from the general public decrease or increase the banking system's reserves?

Accepted Answer

An open market purchase of gov

Question 15

To determine whether the goal of stable prices is being achieved, the Federal Reserve monitors the ________ but uses as its operational guide the ________.

Accepted Answer

A)  core CPI; core inflation rate 
B)  core inflation rate; CPI inflation rate 
C)  CPI; core inflation rate 
D)  GDP price deflator; CPI 
A)  core CPI; core inflation rate 
B)  core inflation rate; CPI inflation rate 
C)  CPI; core inflation rate 
D)  GDP price deflator; CPI

Question 16

If the Fed raises the federal funds rate so that the exchange rate rises, then imports ________ and exports ________.

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 17

If the Fed sells U.S. government securities

Accepted Answer

A)  the federal funds rate rises. 
B)  the U.S. Treasury gains some revenue. 
C)  bank reserves increase. 
D)  None of the above answers is correct. 
A)  the federal funds rate rises. 
B)  the U.S. Treasury gains some revenue. 
C)  bank reserves increase. 
D)  None of the above answers is correct.

Question 18

A widespread fall in asset prices means that banks might become

Accepted Answer

A)  insolvent. 
B)  solvent. 
C)  illiquid. 
D)  too liquid. 
A)  insolvent. 
B)  solvent. 
C)  illiquid. 
D)  too liquid.

Question 19

As long as the federal funds interest rate remains within the corridor, an increase in the quantity of reserves results in a

Accepted Answer

A)  rise in the equilibrium federal funds rate. 
B)  fall in the equilibrium federal funds rate. 
C)  rise in the equilibrium real wage rate. 
D)  fall in the equilibrium money wage rate. 
A)  rise in the equilibrium federal funds rate. 
B)  fall in the equilibrium federal funds rate. 
C)  rise in the equilibrium real wage rate. 
D)  fall in the equilibrium money wage rate.

Question 20

In response to an inflationary gap, the Fed

Accepted Answer

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

The core inflation rate, measured by the core PCE deflator, measures changes in the

Suppose that the equilibrium real interest rate is 2 percent per year, inflation is 2.5 percent and the output gap is 1 percent. Using the Taylor rule, what is the federal funds rate?

In March 2013 the Fed announced that it might decrease its open market purchases of securities by the end of the year. This announcement suggests that the Fed is concerned that

The monetary policy instrument the Federal Reserve chooses to use is the

The Fed engages in open market operations and sells government securities. As long as the federal funds rate stays in the corridor, the result is

The key goal of monetary policy is to

In the short run, the Fed's actions to fight inflation shift the aggregate demand curve leftward.

The Fed buys U.S. government securities from banks in order to

The Federal Open Market Committee meets ________ times per year.

The Federal Reserve's monetary policy goals include

If the Fed lowers the federal funds rate so that the exchange rate falls, then imports and exports .

A decrease in the federal funds rate leads to

List and briefly explain the steps in how monetary policy affects real GDP in the AS/AD model. Tell what the impact is when the Fed eases monetary policy to fight a recession.

Does an open market operation in which the Fed buys securities from the general public decrease or increase the banking system's reserves?

To determine whether the goal of stable prices is being achieved, the Federal Reserve monitors the but uses as its operational guide the .

If the Fed raises the federal funds rate so that the exchange rate rises, then imports and exports .

If the Fed sells U.S. government securities

A widespread fall in asset prices means that banks might become

As long as the federal funds interest rate remains within the corridor, an increase in the quantity of reserves results in a

In response to an inflationary gap, the Fed

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

International Trade Policy

Filters

Exam 14: Monetary Policy

The core inflation rate, measured by the core PCE deflator, measures changes in the

Suppose that the equilibrium real interest rate is 2 percent per year, inflation is 2.5 percent and the output gap is 1 percent. Using the Taylor rule, what is the federal funds rate?

In March 2013 the Fed announced that it might decrease its open market purchases of securities by the end of the year. This announcement suggests that the Fed is concerned that

The monetary policy instrument the Federal Reserve chooses to use is the

The Fed engages in open market operations and sells government securities. As long as the federal funds rate stays in the corridor, the result is

The key goal of monetary policy is to

In the short run, the Fed's actions to fight inflation shift the aggregate demand curve leftward.

The Fed buys U.S. government securities from banks in order to

The Federal Open Market Committee meets ________ times per year.

The Federal Reserve's monetary policy goals include

If the Fed lowers the federal funds rate so that the exchange rate falls, then imports ________ and exports ________.

A decrease in the federal funds rate leads to

List and briefly explain the steps in how monetary policy affects real GDP in the AS/AD model. Tell what the impact is when the Fed eases monetary policy to fight a recession.

Does an open market operation in which the Fed buys securities from the general public decrease or increase the banking system's reserves?

To determine whether the goal of stable prices is being achieved, the Federal Reserve monitors the ________ but uses as its operational guide the ________.

If the Fed raises the federal funds rate so that the exchange rate rises, then imports ________ and exports ________.

If the Fed sells U.S. government securities

A widespread fall in asset prices means that banks might become

As long as the federal funds interest rate remains within the corridor, an increase in the quantity of reserves results in a

In response to an inflationary gap, the Fed

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

International Trade Policy

Filters

If the Fed lowers the federal funds rate so that the exchange rate falls, then imports and exports .

To determine whether the goal of stable prices is being achieved, the Federal Reserve monitors the but uses as its operational guide the .

If the Fed raises the federal funds rate so that the exchange rate rises, then imports and exports .