Question 1

In response to an unanticipated easing 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 2

Assume that the currency-deposit ratio is 0.5.The Federal Reserve carries out open-market operations,purchasing $1 million worth of bonds from banks.This action increased the money supply by $2 million.What is the reserve-deposit ratio?

Accepted Answer

A) 0)25 
B) 0)35 
C) 0)40 
D) 0)50 
A) 0)25 
B) 0)35 
C) 0)40 
D) 0)50

Question 3

In the Keynesian model,suppose the Fed sets a target for the money supply.If the IS curve shifts to the left,and the Fed wants to keep output unchanged,what should the Fed do?

Accepted Answer

A) Reduce taxes. 
B) Reduce the money supply. 
C) Increase taxes. 
D) Increase the money supply. 
A) Reduce taxes. 
B) Reduce the money supply. 
C) Increase taxes. 
D) Increase the money supply.

Question 4

Which of the following is not a policy instrument of the Fed?

Accepted Answer

A) Changing reserve requirements 
B) Open-market operations 
C) Changing the discount rate 
D) Changing the federal government budget deficit 
A) Changing reserve requirements 
B) Open-market operations 
C) Changing the discount rate 
D) Changing the federal government budget deficit

Question 5

The primary criticism by Keynesians of the credibility argument for rules is that

Accepted Answer

A) reputations are a less costly method of gaining credibility. 
B) reputations are a less costly method of maintaining credibility. 
C) the cost of losing flexibility over policy choices may exceed the cost of gaining credibility. 
D) rules that reduce presidential and congressional influence over monetary policy could ultimately be harmful to the economy. 
A) reputations are a less costly method of gaining credibility. 
B) reputations are a less costly method of maintaining credibility. 
C) the cost of losing flexibility over policy choices may exceed the cost of gaining credibility. 
D) rules that reduce presidential and congressional influence over monetary policy could ultimately be harmful to the economy.

Question 6

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

Accepted Answer

A) 3%. 
B) 4%. 
C) 5%. 
D) 6%. 
A) 3%. 
B) 4%. 
C) 5%. 
D) 6%.

Question 7

The primary purpose of the discount window is to

Accepted Answer

A) influence the nation's money supply. 
B) fulfill the bank's lender of last resort role. 
C) control banks' excess reserves. 
D) influence the amount of loans that banks provide to the public. 
A) influence the nation's money supply. 
B) fulfill the bank's lender of last resort role. 
C) control banks' excess reserves. 
D) influence the amount of loans that banks provide to the public.

Question 8

Based on the Taylor rule,from 1965 to 1979,monetary policy was

Accepted Answer

A) too tight. 
B) too easy. 
C) just about right. 
D) too tight from 1965 to about 1970 and too easy from about 1970 to 1979. 
A) too tight. 
B) too easy. 
C) just about right. 
D) too tight from 1965 to about 1970 and too easy from about 1970 to 1979.

Question 9

Since the 1930s,the Fed's most important tool for controlling the money supply has been

Accepted Answer

A) setting the discount rate. 
B) setting reserve requirements. 
C) moral suasion. 
D) open-market operations. 
A) setting the discount rate. 
B) setting reserve requirements. 
C) moral suasion. 
D) open-market operations.

Question 10

If the public is not sure about the central bank's motives,then

Accepted Answer

A) initial releases of data may be less accurate than later data releases. 
B) the predominant source of shocks to the economy must be shocks to the LM curve. 
C) central bankers should try to stabilize the inflation rate. 
D) modern macroeconomic modeling techniques will fail. 
A) initial releases of data may be less accurate than later data releases. 
B) the predominant source of shocks to the economy must be shocks to the LM curve. 
C) central bankers should try to stabilize the inflation rate. 
D) modern macroeconomic modeling techniques will fail.

Question 11

The Fed's forward guidance in 2011 and early 2012 was framed in terms of keeping interest rates low

Accepted Answer

A) for an extended period. 
B) at least until a particular date in the future. 
C)  based on outcomes for the unemployment rate and inflation rate. 
D) until the next Presidential election. 
A) for an extended period. 
B) at least until a particular date in the future. 
C)  based on outcomes for the unemployment rate and inflation rate. 
D) until the next Presidential election.

Question 12

In a fractional reserve banking system with no currency where res is the ratio of reserves to deposits,the money multiplier is

Accepted Answer

A) 1 - res. 
B) 1 + res. 
C) 1/res. 
D) res2 
A) 1 - res. 
B) 1 + res. 
C) 1/res. 
D) res2

Question 13

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts down and to the left,and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run,what should the Fed do? Use the LR curve to formulate your answer.

Accepted Answer

Reduce the real inte

Question 14

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

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 15

The monetary base is defined as

Accepted Answer

A) bank reserves plus currency held by the nonbank public. 
B) bank reserves minus vault cash. 
C) all deposits at the Fed. 
D) deposits at the Fed plus vault cash. 
A) bank reserves plus currency held by the nonbank public. 
B) bank reserves minus vault cash. 
C) all deposits at the Fed. 
D) deposits at the Fed plus vault cash.

Question 16

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts down and to the left,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

Use the LR curve to show what happens to output,the real interest rate,and the price level in the short run and in the long run if the government provides a tax credit to people who buy a new home,which leads to an increase in new housing investment.

Accepted Answer

The tax credit causes desired investment

Question 18

The basic Keynesian argument for discretionary monetary policy is that

Accepted Answer

A) monetary policy is the principal cause of business cycles. 
B) monetary policy is much more effective than fiscal policy. 
C) aggregate demand is unstable and monetary policy can help to stabilize it. 
D) reducing unemployment is much more important than reducing inflation. 
A) monetary policy is the principal cause of business cycles. 
B) monetary policy is much more effective than fiscal policy. 
C) aggregate demand is unstable and monetary policy can help to stabilize it. 
D) reducing unemployment is much more important than reducing inflation.

Question 19

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,what should the Fed do? Use the LR curve to formulate your answer.

Accepted Answer

Increase the real in

Question 20

Describe the Taylor rule.If the Fed were following the rule,what would the nominal Fed funds rate be if inflation over the past year were 4% and output were 1% below its full-employment level?

Accepted Answer

The Taylor rule is a rule for monetary p

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

Assume that the currency-deposit ratio is 0.5.The Federal Reserve carries out open-market operations,purchasing $1 million worth of bonds from banks.This action increased the money supply by $2 million.What is the reserve-deposit ratio?

In the Keynesian model,suppose the Fed sets a target for the money supply.If the IS curve shifts to the left,and the Fed wants to keep output unchanged,what should the Fed do?

Which of the following is not a policy instrument of the Fed?

The primary criticism by Keynesians of the credibility argument for rules is that

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

The primary purpose of the discount window is to

Based on the Taylor rule,from 1965 to 1979,monetary policy was

Since the 1930s,the Fed's most important tool for controlling the money supply has been

If the public is not sure about the central bank's motives,then

The Fed's forward guidance in 2011 and early 2012 was framed in terms of keeping interest rates low

In a fractional reserve banking system with no currency where res is the ratio of reserves to deposits,the money multiplier is

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts down and to the left,and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run,what should the Fed do? Use the LR curve to formulate your answer.

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

The monetary base is defined as

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

Use the LR curve to show what happens to output,the real interest rate,and the price level in the short run and in the long run if the government provides a tax credit to people who buy a new home,which leads to an increase in new housing investment.

The basic Keynesian argument for discretionary monetary policy is that

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,what should the Fed do? Use the LR curve to formulate your answer.

Describe the Taylor rule.If the Fed were following the rule,what would the nominal Fed funds rate be if inflation over the past year were 4% and output were 1% below its full-employment level?

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

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

Assume that the currency-deposit ratio is 0.5.The Federal Reserve carries out open-market operations,purchasing $1 million worth of bonds from banks.This action increased the money supply by $2 million.What is the reserve-deposit ratio?

In the Keynesian model,suppose the Fed sets a target for the money supply.If the IS curve shifts to the left,and the Fed wants to keep output unchanged,what should the Fed do?

Which of the following is not a policy instrument of the Fed?

The primary criticism by Keynesians of the credibility argument for rules is that

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

The primary purpose of the discount window is to

Based on the Taylor rule,from 1965 to 1979,monetary policy was

Since the 1930s,the Fed's most important tool for controlling the money supply has been

If the public is not sure about the central bank's motives,then

The Fed's forward guidance in 2011 and early 2012 was framed in terms of keeping interest rates low

In a fractional reserve banking system with no currency where res is the ratio of reserves to deposits,the money multiplier is

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts down and to the left,and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run,what should the Fed do? Use the LR curve to formulate your answer.

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

The monetary base is defined as

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

Use the LR curve to show what happens to output,the real interest rate,and the price level in the short run and in the long run if the government provides a tax credit to people who buy a new home,which leads to an increase in new housing investment.

The basic Keynesian argument for discretionary monetary policy is that

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,what should the Fed do? Use the LR curve to formulate your answer.

Describe the Taylor rule.If the Fed were following the rule,what would the nominal Fed funds rate be if inflation over the past year were 4% and output were 1% below its full-employment level?

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 easing of monetary policy,output at first,then after about four months.