Question 1

In a closed economy,national saving equals

Accepted Answer

A)  C + I + G. 
B)  Y - C - G. 
C)  Y - C - I. 
D)  Y - G - I. 
A)  C + I + G. 
B)  Y - C - G. 
C)  Y - C - I. 
D)  Y - G - I.

Question 2

In the bank lending channel,an important reason for output increases in the short run after an expansionary monetary policy is that

Accepted Answer

A)  the funds directly available for households and firms to spend will increase. 
B)  prices will increase, making increased production more profitable for firms. 
C)  the increase in government spending from an expansionary monetary policy increases output through the multiplier effect. 
D)  the ability of banks to make loans will increase. 
A)  the funds directly available for households and firms to spend will increase. 
B)  prices will increase, making increased production more profitable for firms. 
C)  the increase in government spending from an expansionary monetary policy increases output through the multiplier effect. 
D)  the ability of banks to make loans will increase.

Question 3

Suppose the stock market crashes resulting in a significant decline in the wealth of consumers.Make use of the IS-MP model to illustrate the impact this has on the economy.How is the Fed likely to respond? Show the impact of the change in monetary policy on the graph of the IS-MP model.

Accepted Answer

The decline in wealth causes the IS curv

Question 4

The bank lending channel

Accepted Answer

A)  emphasizes the role of interest rates in the money supply process. 
B)  emphasizes the importance of borrowers' net worth to the decision of lenders to grant loans. 
C)  emphasizes the behavior of bank-dependent borrowers. 
D)  is another name for the interest rate channel. 
A)  emphasizes the role of interest rates in the money supply process. 
B)  emphasizes the importance of borrowers' net worth to the decision of lenders to grant loans. 
C)  emphasizes the behavior of bank-dependent borrowers. 
D)  is another name for the interest rate channel.

Question 5

Economists who have studied the Phillips curve have concluded that it can shift due to all of the following EXCEPT

Accepted Answer

A)  demand shocks. 
B)  supply shocks. 
C)  changes in household expectations of inflation. 
D)  changes in firms' expectations of inflation. 
A)  demand shocks. 
B)  supply shocks. 
C)  changes in household expectations of inflation. 
D)  changes in firms' expectations of inflation.

Question 6

What limited the effectiveness of monetary policy during the financial crisis of 2007-2009?

Accepted Answer

During the financial crisis,the default

Question 7

What effect would economic weakness in Europe due to a sovereign debt crisis have on the U.S.economy?

Accepted Answer

A)  The IS curve shifts to the right. 
B)  The IS curve shifts to the left. 
C)  Potential GDP increases. 
D)  Potential GDP decreases. 
A)  The IS curve shifts to the right. 
B)  The IS curve shifts to the left. 
C)  Potential GDP increases. 
D)  Potential GDP decreases.

Question 8

A decline in the output gap causes the demand for real balances

Accepted Answer

A)  to rise and the interest rate to fall. 
B)  to fall and the interest rate to rise. 
C)  and the interest rate to fall. 
D)  and the interest rate to rise. 
A)  to rise and the interest rate to fall. 
B)  to fall and the interest rate to rise. 
C)  and the interest rate to fall. 
D)  and the interest rate to rise.

Question 9

What is the difference between an autonomous change in spending and an induced change in spending?

Accepted Answer

An autonomous expenditure is e

Question 10

An autonomous expenditure is one that does NOT depend on

Accepted Answer

A)  government policy. 
B)  the automobile sector. 
C)  interest rates. 
D)  GDP. 
A)  government policy. 
B)  the automobile sector. 
C)  interest rates. 
D)  GDP.

Question 11

In a move up the IS curve

Accepted Answer

A)  investment rises. 
B)  output falls. 
C)  the real interest rate falls. 
D)  saving rises. 
A)  investment rises. 
B)  output falls. 
C)  the real interest rate falls. 
D)  saving rises.

Question 12

If a $10 billion increase in investment leads to a $20 billion increase in GDP,the multiplier is

Accepted Answer

A)  0.5. 
B)  2. 
C)  10. 
D)  30. 
A)  0.5. 
B)  2. 
C)  10. 
D)  30.

Question 13

Explain how an increase in real interest rates affects the components of aggregate expenditure.

Accepted Answer

An increase in the real interest rate ma

Question 14

The LM curve slopes upward to the right because

Accepted Answer

A)  the demand for money plus the demand for nonmoney assets must equal the supply of money plus the supply of nonmoney assets. 
B)  a higher real interest rate is associated with a higher level of the output gap in money market equilibrium. 
C)  a higher real interest rate is associated with a higher level of saving in goods market equilibrium. 
D)  in equilibrium the actual real interest rate must increase one-for-one with the expected real interest rate. 
A)  the demand for money plus the demand for nonmoney assets must equal the supply of money plus the supply of nonmoney assets. 
B)  a higher real interest rate is associated with a higher level of the output gap in money market equilibrium. 
C)  a higher real interest rate is associated with a higher level of saving in goods market equilibrium. 
D)  in equilibrium the actual real interest rate must increase one-for-one with the expected real interest rate.

Question 15

Which of the following would NOT cause a shift in the IS curve?

Accepted Answer

A)  an increase in the domestic real interest rate 
B)  an increase in consumer confidence 
C)  a decrease in the expected future profitability of capital 
D)  a decrease in government purchases 
A)  an increase in the domestic real interest rate 
B)  an increase in consumer confidence 
C)  a decrease in the expected future profitability of capital 
D)  a decrease in government purchases

Question 16

Which of the following is NOT generally recognized as a channel for monetary policy?

Accepted Answer

A)  interest rate channel 
B)  balance sheet channel 
C)  financial market channel 
D)  bank lending channel 
A)  interest rate channel 
B)  balance sheet channel 
C)  financial market channel 
D)  bank lending channel

Question 17

All of the following tend to occur when unemployment is above the natural rate EXCEPT

Accepted Answer

A)  wage increases will be limited. 
B)  inflation will rise. 
C)  increases in the cost of production will be limited. 
D)  there is slack in the labor market. 
A)  wage increases will be limited. 
B)  inflation will rise. 
C)  increases in the cost of production will be limited. 
D)  there is slack in the labor market.

Question 18

When the Fed reduces the real interest rate,which of the following does NOT increase?

Accepted Answer

A)  consumption 
B)  investment 
C)  government purchases 
D)  net exports 
A)  consumption 
B)  investment 
C)  government purchases 
D)  net exports

Question 19

At any point along the LM curve

Accepted Answer

A)  the quantity of money demanded equals the quantity of money supplied. 
B)  the economy must be in general equilibrium. 
C)  the nominal interest rate must equal the real interest rate. 
D)  saving must equal investment. 
A)  the quantity of money demanded equals the quantity of money supplied. 
B)  the economy must be in general equilibrium. 
C)  the nominal interest rate must equal the real interest rate. 
D)  saving must equal investment.

Question 20

A reduction in the money supply will result in

Accepted Answer

A)  a lower interest rate and more negative output gap. 
B)  a higher interest rate and more positive output gap. 
C)  a lower interest rate and more positive output gap. 
D)  a higher interest rates and more negative output gap. 
A)  a lower interest rate and more negative output gap. 
B)  a higher interest rate and more positive output gap. 
C)  a lower interest rate and more positive output gap. 
D)  a higher interest rates and more negative output gap.

In a closed economy,national saving equals

In the bank lending channel,an important reason for output increases in the short run after an expansionary monetary policy is that

Suppose the stock market crashes resulting in a significant decline in the wealth of consumers.Make use of the IS-MP model to illustrate the impact this has on the economy.How is the Fed likely to respond? Show the impact of the change in monetary policy on the graph of the IS-MP model.

The bank lending channel

Economists who have studied the Phillips curve have concluded that it can shift due to all of the following EXCEPT

What limited the effectiveness of monetary policy during the financial crisis of 2007-2009?

What effect would economic weakness in Europe due to a sovereign debt crisis have on the U.S.economy?

A decline in the output gap causes the demand for real balances

What is the difference between an autonomous change in spending and an induced change in spending?

An autonomous expenditure is one that does NOT depend on

In a move up the IS curve

If a $10 billion increase in investment leads to a $20 billion increase in GDP,the multiplier is

Explain how an increase in real interest rates affects the components of aggregate expenditure.

The LM curve slopes upward to the right because

Which of the following would NOT cause a shift in the IS curve?

Which of the following is NOT generally recognized as a channel for monetary policy?

All of the following tend to occur when unemployment is above the natural rate EXCEPT

When the Fed reduces the real interest rate,which of the following does NOT increase?

At any point along the LM curve

A reduction in the money supply will result in

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

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Exam 18: Monetary Theory Ii: the Is-Mp Model

In a closed economy,national saving equals

In the bank lending channel,an important reason for output increases in the short run after an expansionary monetary policy is that

Suppose the stock market crashes resulting in a significant decline in the wealth of consumers.Make use of the IS-MP model to illustrate the impact this has on the economy.How is the Fed likely to respond? Show the impact of the change in monetary policy on the graph of the IS-MP model.

The bank lending channel

Economists who have studied the Phillips curve have concluded that it can shift due to all of the following EXCEPT

What limited the effectiveness of monetary policy during the financial crisis of 2007-2009?

What effect would economic weakness in Europe due to a sovereign debt crisis have on the U.S.economy?

A decline in the output gap causes the demand for real balances

What is the difference between an autonomous change in spending and an induced change in spending?

An autonomous expenditure is one that does NOT depend on

In a move up the IS curve

If a $10 billion increase in investment leads to a $20 billion increase in GDP,the multiplier is

Explain how an increase in real interest rates affects the components of aggregate expenditure.

The LM curve slopes upward to the right because

Which of the following would NOT cause a shift in the IS curve?

Which of the following is NOT generally recognized as a channel for monetary policy?

All of the following tend to occur when unemployment is above the natural rate EXCEPT

When the Fed reduces the real interest rate,which of the following does NOT increase?

At any point along the LM curve

A reduction in the money supply will result in

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Filters