Question 1

An increase in the money supply will:

Accepted Answer

A)  decrease both investment spending and aggregate demand. 
B)  decrease investment spending and increase aggregate demand. 
C)  decrease both consumption spending and aggregate demand. 
D)  increase both investment spending and aggregate demand. 
E)  increase investment spending and decrease aggregate demand 
A)  decrease both investment spending and aggregate demand. 
B)  decrease investment spending and increase aggregate demand. 
C)  decrease both consumption spending and aggregate demand. 
D)  increase both investment spending and aggregate demand. 
E)  increase investment spending and decrease aggregate demand

Question 2

If funds are being loaned from one commercial bank's excess reserves on deposit with the Federal Reserve to another commercial bank's deposit account at the Fed, the transaction is taking place in:

Accepted Answer

A)  the discount market. 
B)  the currency exchange market. 
C)  the federal funds market. 
D)  the open market. 
E)  the reserves market 
A)  the discount market. 
B)  the currency exchange market. 
C)  the federal funds market. 
D)  the open market. 
E)  the reserves market

Question 3

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 change in investment spending following the open market operation by the Fed?

Accepted Answer

A)  −$20 billion 
B)  −$10 billion 
C)  +$20 billion 
D)  +$30 billion 
E)  +$50 billion 
A)  −$20 billion 
B)  −$10 billion 
C)  +$20 billion 
D)  +$30 billion 
E)  +$50 billion

Question 4

The rate of interest that the Federal Reserve charges on loans to member banks is the:

Accepted Answer

A)  open market rate. 
B)  federal funds rate. 
C)  discount rate. 
D)  prime interest rate. 
E)  reserve lending rate. 
A)  open market rate. 
B)  federal funds rate. 
C)  discount rate. 
D)  prime interest rate. 
E)  reserve lending rate.

Question 5

The President of which of the following district banks of the Fed is perpetually present on the Federal Open Market Committee?

Accepted Answer

A)  The New York Fed 
B)  The Seattle Fed 
C)  The Boston Fed 
D)  The Chicago Fed 
E)  The Atlanta Fed 
A)  The New York Fed 
B)  The Seattle Fed 
C)  The Boston Fed 
D)  The Chicago Fed 
E)  The Atlanta Fed

Question 6

The sale of U.S. currency and purchase of foreign currency by the Federal Reserve would shift the demand curve for U.S. dollars to the left.

Accepted Answer

A) True 
 B)False

Question 7

When the Federal Open Market Committee buys government securities:

Accepted Answer

A)  the reserve requirement of banks decrease. 
B)  the reserve deposits of banks decrease. 
C)  the excess reserves of banks increase. 
D)  the federal funds rate increases. 
E)  the legal reserves of banks decrease. 
A)  the reserve requirement of banks decrease. 
B)  the reserve deposits of banks decrease. 
C)  the excess reserves of banks increase. 
D)  the federal funds rate increases. 
E)  the legal reserves of banks decrease.

Question 8

The use of domestic open market operations to counteract the effects of a foreign exchange market intervention on the domestic money supply is known as:

Accepted Answer

A)  normalization. 
B)  quantitative easing. 
C)  sterilization. 
D)  volatilization. 
E)  depreciation. 
A)  normalization. 
B)  quantitative easing. 
C)  sterilization. 
D)  volatilization. 
E)  depreciation.

Question 9

The monetary policy decisions made by the Federal Reserve must be approved by the Congress before they are enacted.

Accepted Answer

A) True 
 B)False

Question 10

There is an inverse relationship between the interest rate and the quantity of money demanded.

Accepted Answer

A) True 
 B)False

Question 11

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.?
  
-Refer to Table 13.2. If the reserve requirement is 10 percent, calculate the maximum amount of loanable funds available with the bank.

Accepted Answer

A)  $1,605 
B)  $1,180 
C)  $545 
D)  $5,450 
E)  $2,150 
A)  $1,605 
B)  $1,180 
C)  $545 
D)  $5,450 
E)  $2,150

Question 12

In order to use inflation targeting, a central bank must:

Accepted Answer

A)  be independent of fiscal policy. 
B)  be dependent on fiscal policy. 
C)  focus on money supply. 
D)  focus on unemployment. 
E)  focus on stable exchange rates. 
A)  be independent of fiscal policy. 
B)  be dependent on fiscal policy. 
C)  focus on money supply. 
D)  focus on unemployment. 
E)  focus on stable exchange rates.

Question 13

Which of the following statements about inflation targeting is true?

Accepted Answer

A)  Inflation targeting allows the central bank to achieve multiple goals like low unemployment and economic growth. 
B)  Inflation targeting has not been adopted by the Fed. 
C)  A central bank that adopts inflation targeting is intrinsically dependent on fiscal policy. 
D)  Inflation targeting decreases the perceived uncertainty derived from the central bank's course of action. 
E)  Inflation targeting increases the uncertainty associated with the central bank's course of action. 
A)  Inflation targeting allows the central bank to achieve multiple goals like low unemployment and economic growth. 
B)  Inflation targeting has not been adopted by the Fed. 
C)  A central bank that adopts inflation targeting is intrinsically dependent on fiscal policy. 
D)  Inflation targeting decreases the perceived uncertainty derived from the central bank's course of action. 
E)  Inflation targeting increases the uncertainty associated with the central bank's course of action.

Question 14

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.?
  
-Refer to Table 13.2. Calculate the change in the bank's excess reserves if the reserve requirement is decreased from 10% to 5%.

Accepted Answer

A)  +$272.5 
B)  +$236 
C)  -$2,360 
D)  -$1877.5 
E)  -$3,210 
A)  +$272.5 
B)  +$236 
C)  -$2,360 
D)  -$1877.5 
E)  -$3,210

Question 15

If you buy for $100 a bond that pays 4.57 percent in annual interest and the current interest yield on the bond rises to 5.13 percent, then the price of the bond has fallen.

Accepted Answer

A) True 
 B)False

Question 16

The FOMC carries out its policies through directives to the bond-trading desk at the:

Accepted Answer

A)  Federal Reserve Bank of Dallas. 
B)  Chicago Fed. 
C)  Federal Reserve of Philadelphia. 
D)  Los Angeles Fed. 
E)  Federal Reserve Bank of New York. 
A)  Federal Reserve Bank of Dallas. 
B)  Chicago Fed. 
C)  Federal Reserve of Philadelphia. 
D)  Los Angeles Fed. 
E)  Federal Reserve Bank of New York.

Question 17

Which of the following will be observed if the Fed raises the reserve requirement?

Accepted Answer

A)  The deposit expansion multiplier will fall 
B)  The discount rate will decline 
C)  The interest rate ceilings will fall 
D)  Excess reserves will increase 
E)  Money supply will increase 
A)  The deposit expansion multiplier will fall 
B)  The discount rate will decline 
C)  The interest rate ceilings will fall 
D)  Excess reserves will increase 
E)  Money supply will increase

Question 18

Assume that there is an unexpected increase in the demand for U.S. dollars in Switzerland. If the foreign currency price of the U.S. dollar is fixed, the U.S. Federal Reserve must intervene in the foreign exchange market such that:

Accepted Answer

A)  the supply of U.S. dollars increases. 
B)  the U.S. demand for the Swiss franc falls. 
C)  the supply of U.S. dollars decreases. 
D)  Swiss imports from the United States are reduced. 
E)  the Swiss currency is devalued. 
A)  the supply of U.S. dollars increases. 
B)  the U.S. demand for the Swiss franc falls. 
C)  the supply of U.S. dollars decreases. 
D)  Swiss imports from the United States are reduced. 
E)  the Swiss currency is devalued.

Question 19

The supply of the U.S. dollar on the foreign exchange market is generated by:

Accepted Answer

A)  demand for U.S. exports. 
B)  the U.S. demand for the products and financial assets of other countries. 
C)  the U.S. demand for domestic goods and services. 
D)  foreign demand for U.S. products. 
E)  foreign demand for U.S. financial assets. 
A)  demand for U.S. exports. 
B)  the U.S. demand for the products and financial assets of other countries. 
C)  the U.S. demand for domestic goods and services. 
D)  foreign demand for U.S. products. 
E)  foreign demand for U.S. financial assets.

Question 20

Assume that the yen price of one U.S. dollar rises to 80 yen and that the Bank of Japan has a target exchange rate of 75 yen per dollar. As a result, the Bank of Japan will intervene in the foreign exchange market by:

Accepted Answer

A)  selling U.S. dollars and buying yen. 
B)  selling both U.S. dollars and yen. 
C)  buying U.S. dollars and selling yen. 
D)  buying both U.S. dollars and yen. 
E)  buying U.S. Treasury securities. 
A)  selling U.S. dollars and buying yen. 
B)  selling both U.S. dollars and yen. 
C)  buying U.S. dollars and selling yen. 
D)  buying both U.S. dollars and yen. 
E)  buying U.S. Treasury securities.

An increase in the money supply will:

If funds are being loaned from one commercial bank's excess reserves on deposit with the Federal Reserve to another commercial bank's deposit account at the Fed, the transaction is taking place in:

The rate of interest that the Federal Reserve charges on loans to member banks is the:

The President of which of the following district banks of the Fed is perpetually present on the Federal Open Market Committee?

The sale of U.S. currency and purchase of foreign currency by the Federal Reserve would shift the demand curve for U.S. dollars to the left.

When the Federal Open Market Committee buys government securities:

The use of domestic open market operations to counteract the effects of a foreign exchange market intervention on the domestic money supply is known as:

The monetary policy decisions made by the Federal Reserve must be approved by the Congress before they are enacted.

There is an inverse relationship between the interest rate and the quantity of money demanded.

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.? -Refer to Table 13.2. If the reserve requirement is 10 percent, calculate the maximum amount of loanable funds available with the bank.

In order to use inflation targeting, a central bank must:

Which of the following statements about inflation targeting is true?

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.? -Refer to Table 13.2. Calculate the change in the bank's excess reserves if the reserve requirement is decreased from 10% to 5%.

If you buy for $100 a bond that pays 4.57 percent in annual interest and the current interest yield on the bond rises to 5.13 percent, then the price of the bond has fallen.

The FOMC carries out its policies through directives to the bond-trading desk at the:

Which of the following will be observed if the Fed raises the reserve requirement?

Assume that there is an unexpected increase in the demand for U.S. dollars in Switzerland. If the foreign currency price of the U.S. dollar is fixed, the U.S. Federal Reserve must intervene in the foreign exchange market such that:

The supply of the U.S. dollar on the foreign exchange market is generated by:

Assume that the yen price of one U.S. dollar rises to 80 yen and that the Bank of Japan has a target exchange rate of 75 yen per dollar. As a result, the Bank of Japan will intervene in the foreign exchange market by:

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

An increase in the money supply will:

If funds are being loaned from one commercial bank's excess reserves on deposit with the Federal Reserve to another commercial bank's deposit account at the Fed, the transaction is taking place in:

The rate of interest that the Federal Reserve charges on loans to member banks is the:

The President of which of the following district banks of the Fed is perpetually present on the Federal Open Market Committee?

The sale of U.S. currency and purchase of foreign currency by the Federal Reserve would shift the demand curve for U.S. dollars to the left.

When the Federal Open Market Committee buys government securities:

The use of domestic open market operations to counteract the effects of a foreign exchange market intervention on the domestic money supply is known as:

The monetary policy decisions made by the Federal Reserve must be approved by the Congress before they are enacted.

There is an inverse relationship between the interest rate and the quantity of money demanded.

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.? -Refer to Table 13.2. If the reserve requirement is 10 percent, calculate the maximum amount of loanable funds available with the bank.

In order to use inflation targeting, a central bank must:

Which of the following statements about inflation targeting is true?

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.? -Refer to Table 13.2. Calculate the change in the bank's excess reserves if the reserve requirement is decreased from 10% to 5%.

If you buy for $100 a bond that pays 4.57 percent in annual interest and the current interest yield on the bond rises to 5.13 percent, then the price of the bond has fallen.

The FOMC carries out its policies through directives to the bond-trading desk at the:

Which of the following will be observed if the Fed raises the reserve requirement?

Assume that there is an unexpected increase in the demand for U.S. dollars in Switzerland. If the foreign currency price of the U.S. dollar is fixed, the U.S. Federal Reserve must intervene in the foreign exchange market such that:

The supply of the U.S. dollar on the foreign exchange market is generated by:

Assume that the yen price of one U.S. dollar rises to 80 yen and that the Bank of Japan has a target exchange rate of 75 yen per dollar. As a result, the Bank of Japan will intervene in the foreign exchange market by:

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