Question 1

The current chair of the Board of Governors of the Federal Reserve System is

Accepted Answer

A) Janet Yellen. 
B) Alan Greenspan. 
C) Ben Bernanke. 
D) Paul Volcker. 
A) Janet Yellen. 
B) Alan Greenspan. 
C) Ben Bernanke. 
D) Paul Volcker.

Question 2

Suppose the Fed has just learned that some foreign economies are headed for recession,which will reduce U.S.exports.This is an economic shock that shifts the IS curve down.What would you do in response to the shock if you want to keep the economy at full-employment equilibrium under each of the following cases?
(a)You use the classical (RBC)model.
(b)You use the Keynesian (efficiency wage)model.
(c)You use the extended classical model with misperceptions.
In each case,show the IS-LM-FE diagram associated with your answer.

Accepted Answer

(a)Do nothing,let P adjust.
(b)Increase

Question 3

According to estimates of the Taylor rule,monetary policy was too tight

Accepted Answer

A) from 1960 to 1965. 
B) from 1965 to 1979. 
C) in the 1980s. 
D) in the 1990s. 
A) from 1960 to 1965. 
B) from 1965 to 1979. 
C) in the 1980s. 
D) in the 1990s.

Question 4

The money supply is $10 million,currency held by the nonbank public is $2 million,and the reserve-deposit ratio is 0.2.Bank reserves are equal to

Accepted Answer

A) $1.6 million. 
B) $2 million. 
C) $4 million. 
D) $8 million. 
A) $1.6 million. 
B) $2 million. 
C) $4 million. 
D) $8 million.

Question 5

When U.S.banks borrow from one another,they must pay the

Accepted Answer

A) discount rate. 
B) prime rate. 
C) Fed funds rate. 
D) Interbank Offer Rate. 
A) discount rate. 
B) prime rate. 
C) Fed funds rate. 
D) Interbank Offer Rate.

Question 6

Which of the following are depository institutions?

Accepted Answer

A) The Federal Reserve Banks of New York and Chicago 
B) The U.S. Treasury and the IRS 
C) Banks and thrifts 
D) Investment banks and finance companies 
A) The Federal Reserve Banks of New York and Chicago 
B) The U.S. Treasury and the IRS 
C) Banks and thrifts 
D) Investment banks and finance companies

Question 7

In the Keynesian model,suppose the Fed wants to keep output unchanged.If the IS curve shifts to the left,and the Fed acts to keep output unchanged,then

Accepted Answer

A) taxes will increase. 
B) the money supply will decline. 
C) the real interest rate will decrease. 
D) taxes will decrease. 
A) taxes will increase. 
B) the money supply will decline. 
C) the real interest rate will decrease. 
D) taxes will decrease.

Question 8

How many Federal Reserve Banks are there?

Accepted Answer

A) 7 
B) 12 
C) 15 
D) 5500 (approximately) 
A) 7 
B) 12 
C) 15 
D) 5500 (approximately)

Question 9

In response to an unanticipated tightening of monetary policy,output ________ at first,then ________ after about four months.

Accepted Answer

A) rises; returns most of the way to its original value 
B) falls; returns most of the way to its original value 
C) remains roughly unchanged; rises significantly 
D) remains roughly unchanged; falls significantly 
A) rises; returns most of the way to its original value 
B) falls; returns most of the way to its original value 
C) remains roughly unchanged; rises significantly 
D) remains roughly unchanged; falls significantly

Question 10

In response to an unanticipated tightening of monetary policy,the Fed funds rate ________ at first,then ________ after 6 to 12 months.

Accepted Answer

A) rises; returns most of the way to its original value 
B) falls; returns most of the way to its original value 
C) remains roughly unchanged; rises significantly 
D) remains roughly unchanged; falls significantly 
A) rises; returns most of the way to its original value 
B) falls; returns most of the way to its original value 
C) remains roughly unchanged; rises significantly 
D) remains roughly unchanged; falls significantly

Question 11

There is ________ relationship between inflation and central bank independence and ________ relationship between long-run rates of unemployment and central bank independence.

Accepted Answer

A) a negative; no 
B) a negative; a negative 
C) a positive; no 
D) a positive; a negative 
A) a negative; no 
B) a negative; a negative 
C) a positive; no 
D) a positive; a negative

Question 12

Suppose the following statistics are available for the economy:
CU = $60 billion
RES = $100 billion
DEP = $1000 billion
(a)Calculate the size of the monetary base,the money supply,the reserve-deposit ratio,the currency-deposit ratio,and the money multiplier.
(b)Suppose the currency-deposit ratio rises to .10,while the reserve-deposit ratio and monetary base remain unchanged.Calculate the money multiplier,the money supply,and the new values of cu,res,and DEP.

Accepted Answer

(a)BASE = CU + RES = 60 + 100 = 160; M =

Question 13

Describe how the real interest rate changes in a Keynesian model if a shock shifts the IS curve down and to the right and the Fed changes its policy to keep output unchanged.

Accepted Answer

If the Fed is going to keep output uncha

Question 14

The degree to which the public believes the central bank's announcements about future policy is its

Accepted Answer

A) reputation. 
B) transparency. 
C) openness. 
D) credibility. 
A) reputation. 
B) transparency. 
C) openness. 
D) credibility.

Question 15

Policymakers may be uncertain about the state of the economy because

Accepted Answer

A) initial releases of data may be less accurate than later data releases. 
B) they don't know the predominant source of shocks to the economy. 
C) they don't know how shocks affect people's expectations. 
D) they are not aware of modern macroeconomic modeling techniques. 
A) initial releases of data may be less accurate than later data releases. 
B) they don't know the predominant source of shocks to the economy. 
C) they don't know how shocks affect people's expectations. 
D) they are not aware of modern macroeconomic modeling techniques.

Question 16

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts up and to the right,and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run,it will

Accepted Answer

A) shift the LR curve up. 
B) not shift the LR curve. 
C) shift the LR curve down. 
D) shift the IS curve up and to the right. 
A) shift the LR curve up. 
B) not shift the LR curve. 
C) shift the LR curve down. 
D) shift the IS curve up and to the right.

Question 17

Suppose the Federal Reserve wanted to reduce the money supply without using open-market operations.It could try to get the public to ________ their currency-deposit ratio and ________ banks' reserve requirements,which would in turn change the banks' reserve-deposit ratio.

Accepted Answer

A) decrease; lower 
B) decrease; raise 
C) increase; lower 
D) increase; raise 
A) decrease; lower 
B) decrease; raise 
C) increase; lower 
D) increase; raise

Question 18

Many countries dropped their use of money-growth targets in the 1980s because

Accepted Answer

A) they were in severe recessions. 
B) political opponents claimed money-growth targeting helped the rich at the expense of the poor. 
C) money demand became unstable. 
D) it was too difficult to coordinate monetary policy with fiscal policy. 
A) they were in severe recessions. 
B) political opponents claimed money-growth targeting helped the rich at the expense of the poor. 
C) money demand became unstable. 
D) it was too difficult to coordinate monetary policy with fiscal policy.

Question 19

The Fed first announced an inflation target of 2% in

Accepted Answer

A) 1979. 
B) 2005. 
C) 2012. 
D) 2015. 
A) 1979. 
B) 2005. 
C) 2012. 
D) 2015.

Question 20

According to the Taylor rule,if inflation in the last year was 6% and output was 2% below its full-employment level,the nominal Fed funds rate should be

Accepted Answer

A) 3%. 
B) 5%. 
C) 7%. 
D) 9%. 
A) 3%. 
B) 5%. 
C) 7%. 
D) 9%.

The current chair of the Board of Governors of the Federal Reserve System is

According to estimates of the Taylor rule,monetary policy was too tight

The money supply is $10 million,currency held by the nonbank public is $2 million,and the reserve-deposit ratio is 0.2.Bank reserves are equal to

When U.S.banks borrow from one another,they must pay the

Which of the following are depository institutions?

In the Keynesian model,suppose the Fed wants to keep output unchanged.If the IS curve shifts to the left,and the Fed acts to keep output unchanged,then

How many Federal Reserve Banks are there?

In response to an unanticipated tightening of monetary policy,output at first,then after about four months.

In response to an unanticipated tightening of monetary policy,the Fed funds rate at first,then after 6 to 12 months.

There is relationship between inflation and central bank independence and relationship between long-run rates of unemployment and central bank independence.

Describe how the real interest rate changes in a Keynesian model if a shock shifts the IS curve down and to the right and the Fed changes its policy to keep output unchanged.

The degree to which the public believes the central bank's announcements about future policy is its

Policymakers may be uncertain about the state of the economy because

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts up and to the right,and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run,it will

Suppose the Federal Reserve wanted to reduce the money supply without using open-market operations.It could try to get the public to their currency-deposit ratio and banks' reserve requirements,which would in turn change the banks' reserve-deposit ratio.

Many countries dropped their use of money-growth targets in the 1980s because

The Fed first announced an inflation target of 2% in

According to the Taylor rule,if inflation in the last year was 6% and output was 2% below its full-employment level,the nominal Fed funds rate should be

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Government Spending and Its Financing

Filters

Exam 14: Monetary Policy and the Federal Reserve System

The current chair of the Board of Governors of the Federal Reserve System is

According to estimates of the Taylor rule,monetary policy was too tight

The money supply is $10 million,currency held by the nonbank public is $2 million,and the reserve-deposit ratio is 0.2.Bank reserves are equal to

When U.S.banks borrow from one another,they must pay the

Which of the following are depository institutions?

In the Keynesian model,suppose the Fed wants to keep output unchanged.If the IS curve shifts to the left,and the Fed acts to keep output unchanged,then

How many Federal Reserve Banks are there?

In response to an unanticipated tightening of monetary policy,output ________ at first,then ________ after about four months.

In response to an unanticipated tightening of monetary policy,the Fed funds rate ________ at first,then ________ after 6 to 12 months.

There is ________ relationship between inflation and central bank independence and ________ relationship between long-run rates of unemployment and central bank independence.

Describe how the real interest rate changes in a Keynesian model if a shock shifts the IS curve down and to the right and the Fed changes its policy to keep output unchanged.

The degree to which the public believes the central bank's announcements about future policy is its

Policymakers may be uncertain about the state of the economy because

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts up and to the right,and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run,it will

Suppose the Federal Reserve wanted to reduce the money supply without using open-market operations.It could try to get the public to ________ their currency-deposit ratio and ________ banks' reserve requirements,which would in turn change the banks' reserve-deposit ratio.

Many countries dropped their use of money-growth targets in the 1980s because

The Fed first announced an inflation target of 2% in

According to the Taylor rule,if inflation in the last year was 6% and output was 2% below its full-employment level,the nominal Fed funds rate should be

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Government Spending and Its Financing

Filters

In response to an unanticipated tightening of monetary policy,output at first,then after about four months.

In response to an unanticipated tightening of monetary policy,the Fed funds rate at first,then after 6 to 12 months.

There is relationship between inflation and central bank independence and relationship between long-run rates of unemployment and central bank independence.

Suppose the Federal Reserve wanted to reduce the money supply without using open-market operations.It could try to get the public to their currency-deposit ratio and banks' reserve requirements,which would in turn change the banks' reserve-deposit ratio.