Question 1

The Board of Governors of the Federal Reserve is:

Accepted Answer

A)  appointed by the president, and each governor serves a 7-year term. 
B)  appointed by the president, and each governor serves a 14-year term. 
C)  elected by Congress, and each governor serves a 10-year term. 
D)  elected by Congress, and each governor serves a 4-year term. 
E)  elected by Congress, and each governor serves a 7-year term 
A)  appointed by the president, and each governor serves a 7-year term. 
B)  appointed by the president, and each governor serves a 14-year term. 
C)  elected by Congress, and each governor serves a 10-year term. 
D)  elected by Congress, and each governor serves a 4-year term. 
E)  elected by Congress, and each governor serves a 7-year term

Question 2

The Fed has set a uniform reserve requirement of 3 percent for all deposits in the U.S. banking system.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following people is most likely to demand U.S. dollars in the foreign exchange market?

Accepted Answer

A)  A United States resident who is traveling to the Greek Islands 
B)  An American investor who intends to buy Japanese government bonds 
C)  A resident of Australia who is traveling to Belgium 
D)  A British importer of U.S. beef 
E)  A U.S. company that is importing avocados from Mexico 
A)  A United States resident who is traveling to the Greek Islands 
B)  An American investor who intends to buy Japanese government bonds 
C)  A resident of Australia who is traveling to Belgium 
D)  A British importer of U.S. beef 
E)  A U.S. company that is importing avocados from Mexico

Question 4

The transactions demand for money increases when more people want to hold some of their wealth in the form of money to reduce the risks associated with unexpected emergencies.

Accepted Answer

A) True 
 B)False

Question 5

Scenario 13.2?Assume the following conditions hold.
Now the Federal Reserve engages in an open market operation by purchasing $1 billion worth of government bonds from private bond dealers, who then deposit the $1 billion in the banks. This acts to lower the equilibrium interest rate by 2 percent.
a.At all banks, excess reserves are zero.
b.The deposit expansion multiplier is 3.
c.The spending multiplier is 5.
d.The initial equilibrium level of national income is $500 billion.
e.The initial equilibrium interest rate equals 6 percent.
f.The investment spending function is as illustrated in the figure below.
  
-Refer to Scenario 13.1. What is the ultimate change in the money supply following the open market operation by the Fed?

Accepted Answer

A)  −$3 billion 
B)  −$0.33 billion 
C)  +$1 billion 
D)  +$2.01 billion 
E)  +$5.2 billion 
A)  −$3 billion 
B)  −$0.33 billion 
C)  +$1 billion 
D)  +$2.01 billion 
E)  +$5.2 billion

Question 6

The buying and selling of government bonds by the FOMC constitutes:

Accepted Answer

A)  an open market operation. 
B)  a federal funds adjustment. 
C)  a discount rate adjustment. 
D)  a change in the reserve requirement. 
E)  sterilization of the money supply 
A)  an open market operation. 
B)  a federal funds adjustment. 
C)  a discount rate adjustment. 
D)  a change in the reserve requirement. 
E)  sterilization of the money supply

Question 7

The Fed controls the money supply to achieve the policy goals set by the United States International Trade Commission.

Accepted Answer

A) True 
 B)False

Question 8

The Federal Reserve System divides the U.S. into _____ districts.

Accepted Answer

A)  5 
B)  21 
C)  6 
D)  12 
E)  17 
A)  5 
B)  21 
C)  6 
D)  12 
E)  17

Question 9

Increased demand for U.S. products by foreign residents will lead to a depreciation of the U.S. dollar relative to foreign currencies.

Accepted Answer

A) True 
 B)False

Question 10

When the Fed uses money growth rates as an intermediate target, it implicitly assumes that the velocity of money is constant over time, at least in the short run.

Accepted Answer

A) True 
 B)False

Question 11

If interest rates decrease:

Accepted Answer

A)  the quantity of money demanded will not change. 
B)  the money demand function will shift to the right. 
C)  the quantity of money demanded will decrease. 
D)  the money demand function will shift to the left. 
E)  the quantity of money demanded will increase. 
A)  the quantity of money demanded will not change. 
B)  the money demand function will shift to the right. 
C)  the quantity of money demanded will decrease. 
D)  the money demand function will shift to the left. 
E)  the quantity of money demanded will increase.

Question 12

The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.?Figure 13.2
  
-Refer to Figure 13.2. Assume that the exchange rate is fixed at MXP 11 = $1 and the free market equilibrium rate is MXP 10 = $1. This means that at MXP 11 = $1,

Accepted Answer

A)  there will be a permanent shortage of U.S. dollars. 
B)  there will be a surplus of Mexican pesos. 
C)  there will be a permanent surplus of U.S. dollars. 
D)  U.S. net exports to Mexico will be positive. 
E)  the U.S. budget deficit will fall. 
A)  there will be a permanent shortage of U.S. dollars. 
B)  there will be a surplus of Mexican pesos. 
C)  there will be a permanent surplus of U.S. dollars. 
D)  U.S. net exports to Mexico will be positive. 
E)  the U.S. budget deficit will fall.

Question 13

Inflation targeting usually increases the uncertainty about the course of action of central banks, as perceived by the general public.

Accepted Answer

A) True 
 B)False

Question 14

Suppose a bank has $850 million in vault cash and a deposit in the Fed of $100 million. If the bank's required reserves equal $500 million, then the bank has excess reserves of:

Accepted Answer

A)  $100 million. 
B)  $350 million. 
C)  $400 million. 
D)  $450 million. 
E)  $500 million. 
A)  $100 million. 
B)  $350 million. 
C)  $400 million. 
D)  $450 million. 
E)  $500 million.

Question 15

When the FOMC sets a monetary policy, it first identifies its intermediate target and then works accordingly to achieve its ultimate goal.

Accepted Answer

A) True 
 B)False

Question 16

When the government raises spending to promote economic growth, the Fed sells government bonds on the open market. This implies that the Federal Reserve and the federal government are following different policy goals.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the U.S. dollar appreciates in value against the Australian dollar, and the Fed intervenes in the foreign exchange market by using U.S. dollars to buy Australian dollars. The Fed could sterilize the expansionary effect of this intervention by:

Accepted Answer

A)  buying U.S. dollars in the foreign exchange market. 
B)  buying U.S. government bonds in the domestic open market. 
C)  selling Australian dollars in the foreign exchange market. 
D)  selling U.S. government bonds in the domestic open market. 
E)  buying Australian dollars in the foreign exchange market. 
A)  buying U.S. dollars in the foreign exchange market. 
B)  buying U.S. government bonds in the domestic open market. 
C)  selling Australian dollars in the foreign exchange market. 
D)  selling U.S. government bonds in the domestic open market. 
E)  buying Australian dollars in the foreign exchange market.

Question 18

In the figure given below panel A represents money market equilibrium, panel B represents investment demand, and panel C represents equilibrium real GDP.?Figure 13.3
  
-Assume the economy is in equilibrium as illustrated by Figure 13.3. Based on the equation of exchange, what is the velocity of money?

Accepted Answer

A)  10 
B)  6 
C)  5 
D)  20 
E)  2 
A)  10 
B)  6 
C)  5 
D)  20 
E)  2

Question 19

Suppose the interest rate on a bond is 12.5 percent and that bond pays $90 a year in interest and sells for $720. If the supply of bonds increases and the price of the bond falls to $600, the interest rate will ____ to ____.

Accepted Answer

A)  increase; 15 percent 
B)  increase; 17.5 percent 
C)  decrease; 7.5 percent 
D)  decrease; 10 percent 
E)  increase; 13 percent 
A)  increase; 15 percent 
B)  increase; 17.5 percent 
C)  decrease; 7.5 percent 
D)  decrease; 10 percent 
E)  increase; 13 percent

Question 20

The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.?Figure 13.2
  
-Refer to Figure 13.2. When the Mexican demand for U.S. dollars rises from D₂ to D₁ and the relevant supply curve is S₁:

Accepted Answer

A)  the U.S. dollar depreciates in value relative to the peso. 
B)  the Mexican peso depreciates in value relative to the U.S. dollar. 
C)  the Mexican peso appreciates in value relative to the U.S. dollar 
D)  U.S. imports from Mexico decreases. 
E)  Mexican net exports to the United States becomes positive. 
A)  the U.S. dollar depreciates in value relative to the peso. 
B)  the Mexican peso depreciates in value relative to the U.S. dollar. 
C)  the Mexican peso appreciates in value relative to the U.S. dollar 
D)  U.S. imports from Mexico decreases. 
E)  Mexican net exports to the United States becomes positive.

The Board of Governors of the Federal Reserve is:

The Fed has set a uniform reserve requirement of 3 percent for all deposits in the U.S. banking system.

Which of the following people is most likely to demand U.S. dollars in the foreign exchange market?

The transactions demand for money increases when more people want to hold some of their wealth in the form of money to reduce the risks associated with unexpected emergencies.

The buying and selling of government bonds by the FOMC constitutes:

The Fed controls the money supply to achieve the policy goals set by the United States International Trade Commission.

The Federal Reserve System divides the U.S. into _____ districts.

Increased demand for U.S. products by foreign residents will lead to a depreciation of the U.S. dollar relative to foreign currencies.

When the Fed uses money growth rates as an intermediate target, it implicitly assumes that the velocity of money is constant over time, at least in the short run.

If interest rates decrease:

The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.?Figure 13.2 -Refer to Figure 13.2. Assume that the exchange rate is fixed at MXP 11 = $1 and the free market equilibrium rate is MXP 10 = $1. This means that at MXP 11 = $1,

Inflation targeting usually increases the uncertainty about the course of action of central banks, as perceived by the general public.

Suppose a bank has $850 million in vault cash and a deposit in the Fed of $100 million. If the bank's required reserves equal $500 million, then the bank has excess reserves of:

When the FOMC sets a monetary policy, it first identifies its intermediate target and then works accordingly to achieve its ultimate goal.

When the government raises spending to promote economic growth, the Fed sells government bonds on the open market. This implies that the Federal Reserve and the federal government are following different policy goals.

Suppose the U.S. dollar appreciates in value against the Australian dollar, and the Fed intervenes in the foreign exchange market by using U.S. dollars to buy Australian dollars. The Fed could sterilize the expansionary effect of this intervention by:

In the figure given below panel A represents money market equilibrium, panel B represents investment demand, and panel C represents equilibrium real GDP.?Figure 13.3 -Assume the economy is in equilibrium as illustrated by Figure 13.3. Based on the equation of exchange, what is the velocity of money?

Suppose the interest rate on a bond is 12.5 percent and that bond pays $90 a year in interest and sells for $720. If the supply of bonds increases and the price of the bond falls to $600, the interest rate will to .

The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.?Figure 13.2 -Refer to Figure 13.2. When the Mexican demand for U.S. dollars rises from D₂ to D₁ and the relevant supply curve is S₁:

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters

Exam 13: Monetary Policy

The Board of Governors of the Federal Reserve is:

The Fed has set a uniform reserve requirement of 3 percent for all deposits in the U.S. banking system.

Which of the following people is most likely to demand U.S. dollars in the foreign exchange market?

The transactions demand for money increases when more people want to hold some of their wealth in the form of money to reduce the risks associated with unexpected emergencies.

The buying and selling of government bonds by the FOMC constitutes:

The Fed controls the money supply to achieve the policy goals set by the United States International Trade Commission.

The Federal Reserve System divides the U.S. into _____ districts.

Increased demand for U.S. products by foreign residents will lead to a depreciation of the U.S. dollar relative to foreign currencies.

When the Fed uses money growth rates as an intermediate target, it implicitly assumes that the velocity of money is constant over time, at least in the short run.

If interest rates decrease:

The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.?Figure 13.2 -Refer to Figure 13.2. Assume that the exchange rate is fixed at MXP 11 = $1 and the free market equilibrium rate is MXP 10 = $1. This means that at MXP 11 = $1,

Inflation targeting usually increases the uncertainty about the course of action of central banks, as perceived by the general public.

Suppose a bank has $850 million in vault cash and a deposit in the Fed of $100 million. If the bank's required reserves equal $500 million, then the bank has excess reserves of:

When the FOMC sets a monetary policy, it first identifies its intermediate target and then works accordingly to achieve its ultimate goal.

When the government raises spending to promote economic growth, the Fed sells government bonds on the open market. This implies that the Federal Reserve and the federal government are following different policy goals.

Suppose the U.S. dollar appreciates in value against the Australian dollar, and the Fed intervenes in the foreign exchange market by using U.S. dollars to buy Australian dollars. The Fed could sterilize the expansionary effect of this intervention by:

Suppose the interest rate on a bond is 12.5 percent and that bond pays $90 a year in interest and sells for $720. If the supply of bonds increases and the price of the bond falls to $600, the interest rate will ____ to ____.

The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso.?Figure 13.2 -Refer to Figure 13.2. When the Mexican demand for U.S. dollars rises from D₂ to D₁ and the relevant supply curve is S₁:

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters

Suppose the interest rate on a bond is 12.5 percent and that bond pays $90 a year in interest and sells for $720. If the supply of bonds increases and the price of the bond falls to $600, the interest rate will to .