Question 1

In 2012, the Federal Reserve announced that it would hold the federal fund rates near 0 percent "at least through mid-2015." This policy attempted to shift the

Accepted Answer

A)  aggregate demand curve leftward. 
B)  aggregate demand curve rightward. 
C)  aggregate supply curve leftward. 
D)  aggregate supply curve rightward. 
A)  aggregate demand curve leftward. 
B)  aggregate demand curve rightward. 
C)  aggregate supply curve leftward. 
D)  aggregate supply curve rightward.

Question 2

-In the above figure, if the economy is initially at point d, the short-run effect of a cut in the federal funds rate is given by movement from point

Accepted Answer

A)  d to point c, increasing output and decreasing the unemployment rate. 
B)  d to point a, increasing output and decreasing the unemployment rate. 
C)  d to point b, increasing output and decreasing the unemployment rate. 
D)  d to point b, keeping output and the unemployment rate constant. 
A)  d to point c, increasing output and decreasing the unemployment rate. 
B)  d to point a, increasing output and decreasing the unemployment rate. 
C)  d to point b, increasing output and decreasing the unemployment rate. 
D)  d to point b, keeping output and the unemployment rate constant.

Question 3

A positive output gap is an inflationary gap.

Accepted Answer

A) True 
 B)False

Question 4

If the Fed wants to increase the quantity of money, it can

Accepted Answer

A)  lower income tax rates. 
B)  purchase U.S. government securities. 
C)  increase the government budget deficit. 
D)  raise the exchange rate. 
A)  lower income tax rates. 
B)  purchase U.S. government securities. 
C)  increase the government budget deficit. 
D)  raise the exchange rate.

Question 5

Why does the Fed pursue price stability as its ultimate goal?

Accepted Answer

The economy works best when the price le

Question 6

If the Fed sells bonds in the open market, net exports will decrease.

Accepted Answer

A) True 
 B)False

Question 7

A former Fed Chair Ben Bernanke had been more precise than other Chairs, suggesting a core inflation rate of ________ per year as being the 'equivalent' to price stability.

Accepted Answer

A)  0 to 1 percent 
B)  0 to 2 percent 
C)  1 to 2 percent 
D)  1 to 4 percent 
A)  0 to 1 percent 
B)  0 to 2 percent 
C)  1 to 2 percent 
D)  1 to 4 percent

Question 8

If the federal funds interest rate remains within the corridor and the demand for reserves is unchanged, an increase in the quantity of reserves will

Accepted Answer

A)  increase the federal funds rate. 
B)  lower the federal funds rate. 
C)  not affect the federal funds rate. 
D)  None of the above answers is correct. 
A)  increase the federal funds rate. 
B)  lower the federal funds rate. 
C)  not affect the federal funds rate. 
D)  None of the above answers is correct.

Question 9

The Federal Reserve's monetary policy goals of maximum employment mean

Accepted Answer

A)  a zero percent unemployment rate. 
B)  a zero percent natural unemployment rate. 
C)  keeping the unemployment rate close to the natural unemployment rate. 
D)  that cyclical unemployment should not necessarily be minimized. 
A)  a zero percent unemployment rate. 
B)  a zero percent natural unemployment rate. 
C)  keeping the unemployment rate close to the natural unemployment rate. 
D)  that cyclical unemployment should not necessarily be minimized.

Question 10

If the federal funds rate is greater than the federal funds rate target, there is a ________ of reserves and the federal funds rate ________.

Accepted Answer

A)  surplus; falls 
B)  surplus; rises 
C)  shortage; falls 
D)  shortage; rises 
A)  surplus; falls 
B)  surplus; rises 
C)  shortage; falls 
D)  shortage; rises

Question 11

-In the above figure, suppose that the economy is at point D. If the Fed aims to fight the recession, the economy will move to

Accepted Answer

A)  point A. 
B)  point B. 
C)  point C. 
D)  Either point A or point C, depending on precisely how the Fed acted. 
A)  point A. 
B)  point B. 
C)  point C. 
D)  Either point A or point C, depending on precisely how the Fed acted.

Question 12

If the aggregate demand curve shifts rightward following a decrease in the federal funds rate, what can be concluded if the short-run aggregate supply curve is rather steep?

Accepted Answer

A)  There will be a significant increase in real GDP with little impact on the price level. 
B)  There will be a significant increase in both real GDP and the price level. 
C)  There will be little increase in real GDP but a significant increase in the price level. 
D)  There is significant unemployment and slack in the economy. 
A)  There will be a significant increase in real GDP with little impact on the price level. 
B)  There will be a significant increase in both real GDP and the price level. 
C)  There will be little increase in real GDP but a significant increase in the price level. 
D)  There is significant unemployment and slack in the economy.

Question 13

Which of the following increases the quantity of money?

Accepted Answer

A)  an individual's cash withdrawal from a bank 
B)  an individual's purchase of a government security from the Fed 
C)  the Fed's purchase of a government security 
D)  an increase in the government's budget deficit 
A)  an individual's cash withdrawal from a bank 
B)  an individual's purchase of a government security from the Fed 
C)  the Fed's purchase of a government security 
D)  an increase in the government's budget deficit

Question 14

If the federal funds interest rate remains within the corridor, an increase in the quantity of reserves leads to a

Accepted Answer

A)  fall in the federal funds rate. 
B)  decrease in the price level. 
C)  reduction in the velocity of circulation. 
D)  leftward shift in the demand curve for reserves. 
A)  fall in the federal funds rate. 
B)  decrease in the price level. 
C)  reduction in the velocity of circulation. 
D)  leftward shift in the demand curve for reserves.

Question 15

Describe how open market operations change the quantity of money.

Accepted Answer

Open market operations affect the quanti

Question 16

In the short run, a rise in the federal funds rate shifts the

Accepted Answer

A)  AD curve leftward. 
B)  SAS curve leftward. 
C)  LAS curve leftward. 
D)  None of the above because a decrease in the quantity of money does not shift a curve. 
A)  AD curve leftward. 
B)  SAS curve leftward. 
C)  LAS curve leftward. 
D)  None of the above because a decrease in the quantity of money does not shift a curve.

Question 17

A decrease in the federal funds rate

Accepted Answer

A)  increases other short-term interest rates, decreases investment, and decreases aggregate demand. 
B)  lowers the exchange rate, increases the supply of loanable funds, and increases aggregate demand. 
C)  lowers other sort-term interest rate, raises the real interest rate, and increases aggregate demand. 
D)  decreases the demand for loanable funds, lowers the real interest rate, and decreases aggregate demand. 
A)  increases other short-term interest rates, decreases investment, and decreases aggregate demand. 
B)  lowers the exchange rate, increases the supply of loanable funds, and increases aggregate demand. 
C)  lowers other sort-term interest rate, raises the real interest rate, and increases aggregate demand. 
D)  decreases the demand for loanable funds, lowers the real interest rate, and decreases aggregate demand.

Question 18

When the Fed lowers the federal funds rate

Accepted Answer

A)  consumption expenditures decrease. 
B)  the dollar increases in value on foreign exchange markets. 
C)  net exports decrease. 
D)  investment expenditures increase. 
A)  consumption expenditures decrease. 
B)  the dollar increases in value on foreign exchange markets. 
C)  net exports decrease. 
D)  investment expenditures increase.

Question 19

In 2016, the federal funds rate was 0.15 percent, which means that the opportunity cost of holding reserves was ________ and consequently banks had a ________ incentive to economize on reserves.

Accepted Answer

A)  low; small 
B)  low; large 
C)  high; small 
D)  high; large 
A)  low; small 
B)  low; large 
C)  high; small 
D)  high; large

Question 20

-In the above figure, if the economy is initially at point D, then if the Fed lowers the federal funds rate

Accepted Answer

A)  the supply of loanable funds decreases, the real interest rate falls, and the AD curve shifts rightward. 
B)  other short-term interest rates fall, net exports increase, and the AD curve shifts rightward. 
C)  the exchange rate rises, investment increases, and the SAS curve shifts rightward. 
D)  the demand for loanable fund and supply of loanable funds both increase by the same amount so that the AD curve shifts rightward. 
A)  the supply of loanable funds decreases, the real interest rate falls, and the AD curve shifts rightward. 
B)  other short-term interest rates fall, net exports increase, and the AD curve shifts rightward. 
C)  the exchange rate rises, investment increases, and the SAS curve shifts rightward. 
D)  the demand for loanable fund and supply of loanable funds both increase by the same amount so that the AD curve shifts rightward.

In 2012, the Federal Reserve announced that it would hold the federal fund rates near 0 percent "at least through mid-2015." This policy attempted to shift the

-In the above figure, if the economy is initially at point d, the short-run effect of a cut in the federal funds rate is given by movement from point

A positive output gap is an inflationary gap.

If the Fed wants to increase the quantity of money, it can

Why does the Fed pursue price stability as its ultimate goal?

If the Fed sells bonds in the open market, net exports will decrease.

A former Fed Chair Ben Bernanke had been more precise than other Chairs, suggesting a core inflation rate of ________ per year as being the 'equivalent' to price stability.

If the federal funds interest rate remains within the corridor and the demand for reserves is unchanged, an increase in the quantity of reserves will

The Federal Reserve's monetary policy goals of maximum employment mean

If the federal funds rate is greater than the federal funds rate target, there is a of reserves and the federal funds rate .

-In the above figure, suppose that the economy is at point D. If the Fed aims to fight the recession, the economy will move to

If the aggregate demand curve shifts rightward following a decrease in the federal funds rate, what can be concluded if the short-run aggregate supply curve is rather steep?

Which of the following increases the quantity of money?

If the federal funds interest rate remains within the corridor, an increase in the quantity of reserves leads to a

Describe how open market operations change the quantity of money.

In the short run, a rise in the federal funds rate shifts the

A decrease in the federal funds rate

When the Fed lowers the federal funds rate

In 2016, the federal funds rate was 0.15 percent, which means that the opportunity cost of holding reserves was and consequently banks had a incentive to economize on reserves.

-In the above figure, if the economy is initially at point D, then if the Fed lowers the federal funds rate

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

In 2012, the Federal Reserve announced that it would hold the federal fund rates near 0 percent "at least through mid-2015." This policy attempted to shift the

-In the above figure, if the economy is initially at point d, the short-run effect of a cut in the federal funds rate is given by movement from point

A positive output gap is an inflationary gap.

If the Fed wants to increase the quantity of money, it can

Why does the Fed pursue price stability as its ultimate goal?

If the Fed sells bonds in the open market, net exports will decrease.

A former Fed Chair Ben Bernanke had been more precise than other Chairs, suggesting a core inflation rate of ________ per year as being the 'equivalent' to price stability.

If the federal funds interest rate remains within the corridor and the demand for reserves is unchanged, an increase in the quantity of reserves will

The Federal Reserve's monetary policy goals of maximum employment mean

If the federal funds rate is greater than the federal funds rate target, there is a ________ of reserves and the federal funds rate ________.

-In the above figure, suppose that the economy is at point D. If the Fed aims to fight the recession, the economy will move to

If the aggregate demand curve shifts rightward following a decrease in the federal funds rate, what can be concluded if the short-run aggregate supply curve is rather steep?

Which of the following increases the quantity of money?

If the federal funds interest rate remains within the corridor, an increase in the quantity of reserves leads to a

Describe how open market operations change the quantity of money.

In the short run, a rise in the federal funds rate shifts the

A decrease in the federal funds rate

When the Fed lowers the federal funds rate

In 2016, the federal funds rate was 0.15 percent, which means that the opportunity cost of holding reserves was ________ and consequently banks had a ________ incentive to economize on reserves.

-In the above figure, if the economy is initially at point D, then if the Fed lowers the federal funds rate

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 federal funds rate is greater than the federal funds rate target, there is a of reserves and the federal funds rate .

In 2016, the federal funds rate was 0.15 percent, which means that the opportunity cost of holding reserves was and consequently banks had a incentive to economize on reserves.