Question 1

The balance sheet channel describes ways in which interest rate changes resulting from monetary policy affect

Accepted Answer

A)  the portfolio decisions of households. 
B)  the portfolio decisions of businesses. 
C)  borrowers' net worth. 
D)  lenders' net worth. 
A)  the portfolio decisions of households. 
B)  the portfolio decisions of businesses. 
C)  borrowers' net worth. 
D)  lenders' net worth.

Question 2

The series of induced changes in consumption spending that result from an initial change in autonomous expenditure is called the

Accepted Answer

A)  induced effect. 
B)  autonomous effect. 
C)  multiplier effect. 
D)  consumption effect. 
A)  induced effect. 
B)  autonomous effect. 
C)  multiplier effect. 
D)  consumption effect.

Question 3

What unusual measures did the Fed take in trying to reduce long-term interest rates during the financial crisis of 2007-2009?

Accepted Answer

A)  buying mortgage-backed securities issued by Fannie Mae and Freddie Mac 
B)  reducing the federal funds rate multiple times 
C)  issuing its own securities 
D)  eliminating the discount rate on loans to member banks 
A)  buying mortgage-backed securities issued by Fannie Mae and Freddie Mac 
B)  reducing the federal funds rate multiple times 
C)  issuing its own securities 
D)  eliminating the discount rate on loans to member banks

Question 4

How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?

Accepted Answer

When the current unemployment rate is gr

Question 5

All of the following help provide the basis for the Fed controlling the real interest rate in the IS-MP model EXCEPT

Accepted Answer

A)  the Fed controls the federal funds rate through open market operations. 
B)  if expected future inflation remains stable, changes in nominal interest rates reflect changes in real interest rates. 
C)  short-term and long-term interest rates tend to move together. 
D)  the Fed's increased use of TIPS in conducting monetary policy. 
A)  the Fed controls the federal funds rate through open market operations. 
B)  if expected future inflation remains stable, changes in nominal interest rates reflect changes in real interest rates. 
C)  short-term and long-term interest rates tend to move together. 
D)  the Fed's increased use of TIPS in conducting monetary policy.

Question 6

How does an expansionary monetary policy affect aggregate expenditure according to the bank lending channel?

Accepted Answer

In the bank lending channel,an expansion

Question 7

In a closed economy,if the goods market is in equilibrium,national saving is $2 trillion,national consumption is $7 trillion,and government purchases are $2.5 trillion,then GDP equals

Accepted Answer

A)  $7 trillion. 
B)  $9.5 trillion. 
C)  $11.5 trillion. 
D)  Not enough information has been provided to determine the answer. 
A)  $7 trillion. 
B)  $9.5 trillion. 
C)  $11.5 trillion. 
D)  Not enough information has been provided to determine the answer.

Question 8

According to the Phillips Curve,which of the following may have taken place if both the unemployment rate and inflation have risen?

Accepted Answer

A)  a negative supply shock 
B)  an increase in expected inflation 
C)  a severe recession 
D)  a negative demand shock 
A)  a negative supply shock 
B)  an increase in expected inflation 
C)  a severe recession 
D)  a negative demand shock

Question 9

Which of the following is NOT a reason given by economists for the failure of Okun's law to account for the rise in unemployment during the recession of 2007-2009?

Accepted Answer

A)  increased willingness among firms to lay off workers during recessions 
B)  a surge in productivity during the recession 
C)  the unusual severity of the recession 
D)  It does not take into account the effect of the stimulus. 
A)  increased willingness among firms to lay off workers during recessions 
B)  a surge in productivity during the recession 
C)  the unusual severity of the recession 
D)  It does not take into account the effect of the stimulus.

Question 10

The level of potential GDP

Accepted Answer

A)  increases as the real rate of interest decreases. 
B)  increases as the real rate of interest increases. 
C)  is unaffected by the real rate of interest. 
D)  is represented on the IS-MP model by a horizontal line at the world real rate of interest. 
A)  increases as the real rate of interest decreases. 
B)  increases as the real rate of interest increases. 
C)  is unaffected by the real rate of interest. 
D)  is represented on the IS-MP model by a horizontal line at the world real rate of interest.

Question 11

Increases in interest rates

Accepted Answer

A)  reduce borrowers' net worth. 
B)  reduce lenders' net worth. 
C)  increase the present value of borrowers' assets. 
D)  raise the cost to businesses of internal funding. 
A)  reduce borrowers' net worth. 
B)  reduce lenders' net worth. 
C)  increase the present value of borrowers' assets. 
D)  raise the cost to businesses of internal funding.

Question 12

The MP curve represents

Accepted Answer

A)  the Fed's monetary policy actions in setting a target for the federal funds rate. 
B)  the relationship between the money supply and the price level. 
C)  a relationship between the real interest rate and manufacturing production. 
D)  the relationship between real interest rates and potential GDP. 
A)  the Fed's monetary policy actions in setting a target for the federal funds rate. 
B)  the relationship between the money supply and the price level. 
C)  a relationship between the real interest rate and manufacturing production. 
D)  the relationship between real interest rates and potential GDP.

Question 13

Most economists think changes in which type of unemployment affects inflation?

Accepted Answer

A)  frictional unemployment 
B)  cyclical unemployment 
C)  structural unemployment 
D)  natural rate of unemployment 
A)  frictional unemployment 
B)  cyclical unemployment 
C)  structural unemployment 
D)  natural rate of unemployment

Question 14

The Fed's large purchases of mortgage-backed securities have ________ their prices and ________ mortgage interest rates.

Accepted Answer

A)  increased; raised 
B)  increased; lowered 
C)  decreased; raised 
D)  decreased; lowered 
A)  increased; raised 
B)  increased; lowered 
C)  decreased; raised 
D)  decreased; lowered

Question 15

Which of the following is NOT true of the interest rate channel?

Accepted Answer

A)  Bank loans play no special role. 
B)  The Fed changes the real interest rate which affects the components of aggregate expenditure. 
C)  Borrowers are indifferent as to how and from whom they raise funds. 
D)  Alternative sources of funds are not substitutes for each other. 
A)  Bank loans play no special role. 
B)  The Fed changes the real interest rate which affects the components of aggregate expenditure. 
C)  Borrowers are indifferent as to how and from whom they raise funds. 
D)  Alternative sources of funds are not substitutes for each other.

Question 16

For the goods market to be in equilibrium in a closed economy,which of the following must be TRUE?

Accepted Answer

A)  Y = S + I + G 
B)  S + I = C + G 
C)  S + G = Y + C 
D)  S = I 
A)  Y = S + I + G 
B)  S + I = C + G 
C)  S + G = Y + C 
D)  S = I

Question 17

As of the end of 2016,Fannie Mae and Freddie Mac

Accepted Answer

A)  were still under the control of the Federal Housing Finance Agency, and no definite plans for privatizing them were in place. 
B)  were still under the control of the Federal Housing Finance Agency, with Congress set to privatize them by the end of 2017. 
C)  had again become private. 
D)  were no longer in existence. 
A)  were still under the control of the Federal Housing Finance Agency, and no definite plans for privatizing them were in place. 
B)  were still under the control of the Federal Housing Finance Agency, with Congress set to privatize them by the end of 2017. 
C)  had again become private. 
D)  were no longer in existence.

Question 18

The effect of the shadow bank lending channel is to make expansionary monetary policy ________ when the expansionary policy takes the form of very low interest rates.

Accepted Answer

A)  somewhat more effective 
B)  somewhat less effective 
C)  totally effective 
D)  completely ineffective 
A)  somewhat more effective 
B)  somewhat less effective 
C)  totally effective 
D)  completely ineffective

Question 19

Which of the following would NOT cause the IS curve to shift to the left?

Accepted Answer

A)  a decrease in government purchases 
B)  an increase in consumer confidence 
C)  a decrease in foreign demand for domestic products 
D)  a decrease in the expected future profitability of capital 
A)  a decrease in government purchases 
B)  an increase in consumer confidence 
C)  a decrease in foreign demand for domestic products 
D)  a decrease in the expected future profitability of capital

Question 20

In the IS-MP model,when the Fed increases the real interest rate

Accepted Answer

A)  the MP curve shifts up resulting in a decline in the output gap. 
B)  the MP curve shifts up resulting in an increase in the output gap. 
C)  the MP curve shifts down resulting in a decline in the output gap. 
D)  the MP curve shifts down resulting in an increase in the output gap. 
A)  the MP curve shifts up resulting in a decline in the output gap. 
B)  the MP curve shifts up resulting in an increase in the output gap. 
C)  the MP curve shifts down resulting in a decline in the output gap. 
D)  the MP curve shifts down resulting in an increase in the output gap.

The balance sheet channel describes ways in which interest rate changes resulting from monetary policy affect

The series of induced changes in consumption spending that result from an initial change in autonomous expenditure is called the

What unusual measures did the Fed take in trying to reduce long-term interest rates during the financial crisis of 2007-2009?

How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?

All of the following help provide the basis for the Fed controlling the real interest rate in the IS-MP model EXCEPT

How does an expansionary monetary policy affect aggregate expenditure according to the bank lending channel?

In a closed economy,if the goods market is in equilibrium,national saving is $2 trillion,national consumption is $7 trillion,and government purchases are $2.5 trillion,then GDP equals

According to the Phillips Curve,which of the following may have taken place if both the unemployment rate and inflation have risen?

Which of the following is NOT a reason given by economists for the failure of Okun's law to account for the rise in unemployment during the recession of 2007-2009?

The level of potential GDP

Increases in interest rates

The MP curve represents

Most economists think changes in which type of unemployment affects inflation?

The Fed's large purchases of mortgage-backed securities have their prices and mortgage interest rates.

Which of the following is NOT true of the interest rate channel?

For the goods market to be in equilibrium in a closed economy,which of the following must be TRUE?

As of the end of 2016,Fannie Mae and Freddie Mac

The effect of the shadow bank lending channel is to make expansionary monetary policy ________ when the expansionary policy takes the form of very low interest rates.

Which of the following would NOT cause the IS curve to shift to the left?

In the IS-MP model,when the Fed increases the real interest rate

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

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

The balance sheet channel describes ways in which interest rate changes resulting from monetary policy affect

The series of induced changes in consumption spending that result from an initial change in autonomous expenditure is called the

What unusual measures did the Fed take in trying to reduce long-term interest rates during the financial crisis of 2007-2009?

How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?

All of the following help provide the basis for the Fed controlling the real interest rate in the IS-MP model EXCEPT

How does an expansionary monetary policy affect aggregate expenditure according to the bank lending channel?

In a closed economy,if the goods market is in equilibrium,national saving is $2 trillion,national consumption is $7 trillion,and government purchases are $2.5 trillion,then GDP equals

According to the Phillips Curve,which of the following may have taken place if both the unemployment rate and inflation have risen?

Which of the following is NOT a reason given by economists for the failure of Okun's law to account for the rise in unemployment during the recession of 2007-2009?

The level of potential GDP

Increases in interest rates

The MP curve represents

Most economists think changes in which type of unemployment affects inflation?

The Fed's large purchases of mortgage-backed securities have ________ their prices and ________ mortgage interest rates.

Which of the following is NOT true of the interest rate channel?

For the goods market to be in equilibrium in a closed economy,which of the following must be TRUE?

As of the end of 2016,Fannie Mae and Freddie Mac

The effect of the shadow bank lending channel is to make expansionary monetary policy ________ when the expansionary policy takes the form of very low interest rates.

Which of the following would NOT cause the IS curve to shift to the left?

In the IS-MP model,when the Fed increases the real interest rate

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

The Fed's large purchases of mortgage-backed securities have their prices and mortgage interest rates.