Question 1

When the Fed increases the money supply by buying Treasury securities,it will

Accepted Answer

A) decrease short-term interest rates to a greater degree than long-term interest rates. 
B) decrease long-term interest rates to a greater degree than short-term interest rates. 
C) increase short-term interest rates to a greater degree than long-term interest rates. 
D) increase long-term interest rates to a greater degree than short-term interest rates. 
A) decrease short-term interest rates to a greater degree than long-term interest rates. 
B) decrease long-term interest rates to a greater degree than short-term interest rates. 
C) increase short-term interest rates to a greater degree than long-term interest rates. 
D) increase long-term interest rates to a greater degree than short-term interest rates.

Question 2

A shift to a more expansionary monetary policy will generally _________ in the short run,but if the rapid monetary expansion persists,the long-run result will be ______.(fill in the blanks. )

Accepted Answer

A) expand output and employment;inflation 
B) increase the general level of prices;expand output and employment 
C) increase the rate of unemployment;reduce the rate of inflation 
D) reduce the rate of inflation;increase the rate of unemployment 
A) expand output and employment;inflation 
B) increase the general level of prices;expand output and employment 
C) increase the rate of unemployment;reduce the rate of inflation 
D) reduce the rate of inflation;increase the rate of unemployment

Question 3

In the short run,an unanticipated shift to a more restrictive monetary policy is most likely to result in

Accepted Answer

A) a decrease in short-term interest rates. 
B) a reduction in the growth rate of real GDP. 
C) an increase in the rate of inflation. 
D) an increase in employment. 
A) a decrease in short-term interest rates. 
B) a reduction in the growth rate of real GDP. 
C) an increase in the rate of inflation. 
D) an increase in employment.

Question 4

When the Fed purchases additional securities and shifts to a more expansionary monetary policy,

Accepted Answer

A) the inflation rate will rise almost immediately. 
B) the growth of output and employment will increase quickly. 
C) several months will typically pass before the shift in policy exerts much impact on output and employment. 
D) this policy will eventually lead to a decline in the general level of prices if it is continued for a prolonged period of time. 
A) the inflation rate will rise almost immediately. 
B) the growth of output and employment will increase quickly. 
C) several months will typically pass before the shift in policy exerts much impact on output and employment. 
D) this policy will eventually lead to a decline in the general level of prices if it is continued for a prolonged period of time.

Question 5

If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment,which of the following would be most appropriate?

Accepted Answer

A) a larger budget deficit and the purchase of securities in the open market 
B) a government surplus and the sale of securities in the open market 
C) a larger government deficit and an increase in the discount rate 
D) a government surplus and a reduction in the discount rate 
A) a larger budget deficit and the purchase of securities in the open market 
B) a government surplus and the sale of securities in the open market 
C) a larger government deficit and an increase in the discount rate 
D) a government surplus and a reduction in the discount rate

Question 6

An unexpected increase in the supply of money will

Accepted Answer

A) reduce the real rate of interest and,thereby,trigger an increase in current spending by households and businesses. 
B) reduce aggregate demand and real output in the short run. 
C) increase only the general level of prices in the short run. 
D) lead to a higher rate of unemployment in the short run. 
A) reduce the real rate of interest and,thereby,trigger an increase in current spending by households and businesses. 
B) reduce aggregate demand and real output in the short run. 
C) increase only the general level of prices in the short run. 
D) lead to a higher rate of unemployment in the short run.

Question 7

In the short run,an unanticipated shift to a more expansionary monetary policy is most likely to result in

Accepted Answer

A) an increase in short-term interest rates. 
B) a reduction in aggregate demand. 
C) a reduction in the inflation rate. 
D) an increase in employment. 
A) an increase in short-term interest rates. 
B) a reduction in aggregate demand. 
C) a reduction in the inflation rate. 
D) an increase in employment.

Question 8

If the monetary authorities persistently expand the money supply at a rapid rate,the probable result will be

Accepted Answer

A) inflation. 
B) high nominal interest rates. 
C) rapid growth of real GDP. 
D) both a and b. 
A) inflation. 
B) high nominal interest rates. 
C) rapid growth of real GDP. 
D) both a and b.

Question 9

Which of the following contributed to the financial crisis of 2008?

Accepted Answer

A) the housing price boom (2002-2005),followed by a housing price bust (2007-2008) 
B) a sharp reduction in stock prices in 2008 
C) a sharp increase in the price of crude oil from January 2007 to mid-year 2008 
D) all of the above 
A) the housing price boom (2002-2005),followed by a housing price bust (2007-2008) 
B) a sharp reduction in stock prices in 2008 
C) a sharp increase in the price of crude oil from January 2007 to mid-year 2008 
D) all of the above

Question 10

Discuss the following views concerning the impact of monetary policy:
a.classicals
b.Keynesians
c.monetarists
d."modern view"

Accepted Answer

a.The classicals believe in the quantity

Question 11

Use the figure below to answer the following question(s).
Figure 14-5
  
-In Figure 14-5,AD₁ and SRAS₁ indicate an economy initially operating at full-employment output level,Y₁.The long-run impact of the Fed unexpectedly shifting to a more restrictive monetary policy will be

Accepted Answer

A) a decrease in aggregate demand to AD₂ and a decrease in real output to Y₂. 
B) a decrease in the full-employment level of output to Y₂. 
C) a decrease in aggregate demand to AD₂ and an increase in short-run aggregate supply to SRAS₂,causing the price level to fall to P₃ and real output to remain unchanged at Y₁. 
D) no change;AD and SRAS will stay at AD₁ and SRAS₁. 
A) a decrease in aggregate demand to AD₂ and a decrease in real output to Y₂. 
B) a decrease in the full-employment level of output to Y₂. 
C) a decrease in aggregate demand to AD₂ and an increase in short-run aggregate supply to SRAS₂,causing the price level to fall to P₃ and real output to remain unchanged at Y₁. 
D) no change;AD and SRAS will stay at AD₁ and SRAS₁.

Question 12

Which of the following interest rates will be least affected by a shift in monetary policy that alters the money supply?

Accepted Answer

A) a three-month certificate of deposit 
B) interest on checking accounts 
C) a one-year bank loan 
D) a thirty-year home mortgage 
A) a three-month certificate of deposit 
B) interest on checking accounts 
C) a one-year bank loan 
D) a thirty-year home mortgage

Question 13

When the Fed unexpectedly increases the money supply,

Accepted Answer

A) real interest rates will rise and the foreign exchange value of the dollar will appreciate. 
B) real interest rates will rise and the foreign exchange value of the dollar will depreciate. 
C) real interest rates will fall and the foreign exchange value of the dollar will appreciate. 
D) real interest rates will fall and the foreign exchange value of the dollar will depreciate. 
A) real interest rates will rise and the foreign exchange value of the dollar will appreciate. 
B) real interest rates will rise and the foreign exchange value of the dollar will depreciate. 
C) real interest rates will fall and the foreign exchange value of the dollar will appreciate. 
D) real interest rates will fall and the foreign exchange value of the dollar will depreciate.

Question 14

Which of the following will increase interest rates in the short run?

Accepted Answer

A) an decrease in reserve requirements 
B) the sale of bonds by the Federal Reserve in the open market 
C) a decrease in real GDP 
D) an decrease in the price level 
A) an decrease in reserve requirements 
B) the sale of bonds by the Federal Reserve in the open market 
C) a decrease in real GDP 
D) an decrease in the price level

Question 15

The pre-1930 classical economists thought the primary effect of an increase in the money supply would be

Accepted Answer

A) an increase in real GDP. 
B) a reduction in velocity. 
C) a decrease in unemployment. 
D) a proportional increase in prices. 
A) an increase in real GDP. 
B) a reduction in velocity. 
C) a decrease in unemployment. 
D) a proportional increase in prices.

Question 16

If expansionary monetary policy reduces real interest rates in the United States,which of the following is most likely to occur?

Accepted Answer

A) Net foreign investment will decline,causing the dollar to depreciate and net exports to increase. 
B) Net foreign investment will decline,causing the dollar to appreciate and net exports to decrease. 
C) Net foreign investment will increase,causing the dollar to appreciate and net exports to decline. 
D) Net foreign investment will increase,causing the dollar to depreciate and net exports to increase. 
A) Net foreign investment will decline,causing the dollar to depreciate and net exports to increase. 
B) Net foreign investment will decline,causing the dollar to appreciate and net exports to decrease. 
C) Net foreign investment will increase,causing the dollar to appreciate and net exports to decline. 
D) Net foreign investment will increase,causing the dollar to depreciate and net exports to increase.

Question 17

If the Fed unexpectedly decreases the money supply,real GDP

Accepted Answer

A) increases because the resulting increase in the interest rate leads to a decrease in investment. 
B) increases because the resulting decrease in the interest rate leads to an increase in investment. 
C) decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D) decreases because the resulting increase in the interest rate leads to an increase in investment. 
E) decreases because the resulting decrease in the interest rate leads to an increase in investment. 
A) increases because the resulting increase in the interest rate leads to a decrease in investment. 
B) increases because the resulting decrease in the interest rate leads to an increase in investment. 
C) decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D) decreases because the resulting increase in the interest rate leads to an increase in investment. 
E) decreases because the resulting decrease in the interest rate leads to an increase in investment.

Question 18

If the actual federal funds rate is 1 percent,when the target rate called for by the Taylor rule is 5 percent,this indicates that

Accepted Answer

A) monetary policy is overly expansionary and a shift toward a more restrictive policy would be appropriate. 
B) monetary policy is too restrictive and a shift to a more expansionary policy would be appropriate. 
C) monetary policy is unable to influence interest rates. 
D) current monetary policy is on target and no policy shift is needed. 
A) monetary policy is overly expansionary and a shift toward a more restrictive policy would be appropriate. 
B) monetary policy is too restrictive and a shift to a more expansionary policy would be appropriate. 
C) monetary policy is unable to influence interest rates. 
D) current monetary policy is on target and no policy shift is needed.

Question 19

Which of the following interest rates will be most affected by a shift to a more restrictive monetary policy?

Accepted Answer

A) rate on a 30-year home mortgage 
B) rate on a 20-year Treasury bond 
C) rate on a 10-year bank loan 
D) rate on a three-month certificate of deposit 
A) rate on a 30-year home mortgage 
B) rate on a 20-year Treasury bond 
C) rate on a 10-year bank loan 
D) rate on a three-month certificate of deposit

Question 20

Which of the following best describes the relationship between the velocity of money and the demand for money?

Accepted Answer

A) The demand for money is not related to the velocity of money. 
B) When the demand for money increases,the velocity of money increases. 
C) The demand for money must be stable for the velocity of money to increase. 
D) When the demand for money declines,the velocity of money increases. 
A) The demand for money is not related to the velocity of money. 
B) When the demand for money increases,the velocity of money increases. 
C) The demand for money must be stable for the velocity of money to increase. 
D) When the demand for money declines,the velocity of money increases.

Exam 14: Modern Macroeconomics and Monetary Policy

When the Fed increases the money supply by buying Treasury securities,it will

A shift to a more expansionary monetary policy will generally _________ in the short run,but if the rapid monetary expansion persists,the long-run result will be ______.(fill in the blanks. )

In the short run,an unanticipated shift to a more restrictive monetary policy is most likely to result in

When the Fed purchases additional securities and shifts to a more expansionary monetary policy,

If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment,which of the following would be most appropriate?

An unexpected increase in the supply of money will

In the short run,an unanticipated shift to a more expansionary monetary policy is most likely to result in

If the monetary authorities persistently expand the money supply at a rapid rate,the probable result will be

Which of the following contributed to the financial crisis of 2008?

Discuss the following views concerning the impact of monetary policy: a.classicals b.Keynesians c.monetarists d."modern view"

Use the figure below to answer the following question(s). Figure 14-5 -In Figure 14-5,AD₁ and SRAS₁ indicate an economy initially operating at full-employment output level,Y₁.The long-run impact of the Fed unexpectedly shifting to a more restrictive monetary policy will be

Which of the following interest rates will be least affected by a shift in monetary policy that alters the money supply?

When the Fed unexpectedly increases the money supply,

Which of the following will increase interest rates in the short run?

The pre-1930 classical economists thought the primary effect of an increase in the money supply would be

If expansionary monetary policy reduces real interest rates in the United States,which of the following is most likely to occur?

If the Fed unexpectedly decreases the money supply,real GDP

If the actual federal funds rate is 1 percent,when the target rate called for by the Taylor rule is 5 percent,this indicates that

Which of the following interest rates will be most affected by a shift to a more restrictive monetary policy?

Which of the following best describes the relationship between the velocity of money and the demand for money?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

Filters

A shift to a more expansionary monetary policy will generally ___ in the short run,but if the rapid monetary expansion persists,the long-run result will be .(fill in the blanks. )