Question 1

Households' and businesses' desired holding ratio of currency-to-deposits __________ until the late-1970s and has ___________ since then.

Accepted Answer

A)  was fairly stable; fluctuated substantially 
B)  was fairly stable; decreased substantially 
C)  decreased substantially; been fairly stable 
D)  increased substantially; fluctuated substantially 
A)  was fairly stable; fluctuated substantially 
B)  was fairly stable; decreased substantially 
C)  decreased substantially; been fairly stable 
D)  increased substantially; fluctuated substantially A

Question 2

Each of the following was a part of the Employment Act of 1946 except

Accepted Answer

A)  establishing Congress's Joint Economic Committee. 
B)  establishing the President's Council of Economic Advisors. 
C)  calling on the President to estimate and forecast the current and future level of economic activity in the United States. 
D)  establishing the Federal Reserve System. 
A)  establishing Congress's Joint Economic Committee. 
B)  establishing the President's Council of Economic Advisors. 
C)  calling on the President to estimate and forecast the current and future level of economic activity in the United States. 
D)  establishing the Federal Reserve System. D

Question 3

As an example of the problem of using only the money supply as a leading indicator, during 1992 if M3 were used as the measure of the money supply rather than M1

Accepted Answer

A)  monetary policy would have been deemed contractionary, deepening the 1990-92 recession. 
B)  monetary policy would have been deemed expansionary, resulting in short-term nominal interest rates of less than zero. 
C)  monetary policy would have been deemed neutral. 
D)  monetary policy would have been deemed expansionary, resulting in short-term real interest rates of less than zero. 
A)  monetary policy would have been deemed contractionary, deepening the 1990-92 recession. 
B)  monetary policy would have been deemed expansionary, resulting in short-term nominal interest rates of less than zero. 
C)  monetary policy would have been deemed neutral. 
D)  monetary policy would have been deemed expansionary, resulting in short-term real interest rates of less than zero. A

Question 4

Fiscal policy in the United States today

Accepted Answer

A)  is managed by the Congress (subject to the veto by the President). 
B)  is managed by the President (subject to the veto of the Congress). 
C)  is managed by the Board of Governors of the Federal Reserve. 
D)  is managed by the Treasury Department. 
A)  is managed by the Congress (subject to the veto by the President). 
B)  is managed by the President (subject to the veto of the Congress). 
C)  is managed by the Board of Governors of the Federal Reserve. 
D)  is managed by the Treasury Department.

Question 5

The controversy over macroeconomic policy can be characterized as a continuum with one end of the spectrum being held by those economists who advocate _______________, and the other end of the spectrum being held by those economists who advocate ___________________.

Accepted Answer

A)  that a passive role for government is best; that an active role for government is necessary. 
B)  an activist monetary policy; an activist fiscal policy. 
C)  an activist structural policy; an activist monetary policy. 
D)  a passive fiscal policy; an activist fiscal policy. 
A)  that a passive role for government is best; that an active role for government is necessary. 
B)  an activist monetary policy; an activist fiscal policy. 
C)  an activist structural policy; an activist monetary policy. 
D)  a passive fiscal policy; an activist fiscal policy.

Question 6

If the reserve requirement is 5%, households' and businesses' desired holding ratio of currency-to-deposits is .1, and the ratio of excess reserves to total deposits that banks desire to hold is .05, the money multiplier is

Accepted Answer

A)  5.5. 
B)  2.2. 
C)  22. 
D)  5. 
A)  5.5. 
B)  2.2. 
C)  22. 
D)  5.

Question 7

If _________ is below the target level, the central bank should

Accepted Answer

A)  inflation; lower real interest rates. 
B)  inflation; raise real interest rates. 
C)  real GDP; raise real interest rates. 
D)  unemployment; lower real interest rates. 
A)  inflation; lower real interest rates. 
B)  inflation; raise real interest rates. 
C)  real GDP; raise real interest rates. 
D)  unemployment; lower real interest rates.

Question 8

An activist central bank concerned with _________ would

Accepted Answer

A)  real GDP; lower real interest rates if real GDP was above its potential level. 
B)  real GDP; lower real interest rates if real GDP was below its target level. 
C)  unemployment; lower real interest rates if unemployment was below the natural rate. 
D)  unemployment; raise real interest rates if unemployment was above the natural rate. 
A)  real GDP; lower real interest rates if real GDP was above its potential level. 
B)  real GDP; lower real interest rates if real GDP was below its target level. 
C)  unemployment; lower real interest rates if unemployment was below the natural rate. 
D)  unemployment; raise real interest rates if unemployment was above the natural rate.

Question 9

The questions with which Chapter 13 is concerned include each of the following except

Accepted Answer

A)  how long are the lags associated with stabilization policy? 
B)  why are economists in such agreement about stabilization policy? 
C)  is monetary or fiscal policy a more effective mode of stabilization policy? 
D)  how does uncertainty affect the way stabilization policy should be made? 
A)  how long are the lags associated with stabilization policy? 
B)  why are economists in such agreement about stabilization policy? 
C)  is monetary or fiscal policy a more effective mode of stabilization policy? 
D)  how does uncertainty affect the way stabilization policy should be made?

Question 10

The Board of Governors of the Federal Reserve is composed of

Accepted Answer

A)  a Chair, Vice Chair, and five Governors, all nominated by the President and confirmed by the House of
Representatives. 
B)  a Chair, Vice Chair, and five Presidents of Federal Reserve Banks, all nominated by the President and confirmed by the Senate. 
C)  a Chair, Vice Chair, and five Governors, all nominated by the President and confirmed by the Senate. 
D)  a Chair, Vice Chair, five Governors, and five Presidents of Federal Reserve Banks, all nominated by the President and confirmed by the Senate. 
A)  a Chair, Vice Chair, and five Governors, all nominated by the President and confirmed by the House of
Representatives. 
B)  a Chair, Vice Chair, and five Presidents of Federal Reserve Banks, all nominated by the President and confirmed by the Senate. 
C)  a Chair, Vice Chair, and five Governors, all nominated by the President and confirmed by the Senate. 
D)  a Chair, Vice Chair, five Governors, and five Presidents of Federal Reserve Banks, all nominated by the President and confirmed by the Senate.

Question 11

If the principal instability in the economy is due to instability in the relationship between the monetary base and the money supply (because the currency-to-deposits and reserves-to-deposits ratios vary)

Accepted Answer

A)  targeting interest rates will do little or nothing to stabilize the magnitude of shocks to the economy. 
B)  the Federal Reserve to take monetary policy action to shift the IS curve in the opposite direction of the shock. 
C)  it would be better to have a monetary policy reaction function that reacts to leading indicators and outcomes. 
D)  targeting interest rates will stabilize the magnitude of shocks to the economy. 
A)  targeting interest rates will do little or nothing to stabilize the magnitude of shocks to the economy. 
B)  the Federal Reserve to take monetary policy action to shift the IS curve in the opposite direction of the shock. 
C)  it would be better to have a monetary policy reaction function that reacts to leading indicators and outcomes. 
D)  targeting interest rates will stabilize the magnitude of shocks to the economy.

Question 12

The steps in the Budget Process include each of the following except

Accepted Answer

A)  President adds his priorities and submits a budget to the Congress. 
B)  Congress passes its budget resolution. 
C)  Congress considers and votes on spending bills. 
D)  Congressional committees negotiate with the Federal Reserve. 
A)  President adds his priorities and submits a budget to the Congress. 
B)  Congress passes its budget resolution. 
C)  Congress considers and votes on spending bills. 
D)  Congressional committees negotiate with the Federal Reserve.

Question 13

If the reserve requirement is 5%, households' and businesses' desired holding ratio of currency-to-deposits is .2, and the Federal Reserve increases the monetary base by $100 billion, the increase in the money supply would be

Accepted Answer

A)  $400 billion. 
B)  $4000 billion. 
C)  $2400 billion. 
D)  $480 billion. 
A)  $400 billion. 
B)  $4000 billion. 
C)  $2400 billion. 
D)  $480 billion.

Question 14

Each of the following is a component of the Conference Board's Index of Leading Indicators except

Accepted Answer

A)  money supply, M2. 
B)  average weekly initial claims for disability insurance. 
C)  manufacturers' new orders, nondefense capital goods. 
D)  stock prices, 500 common stocks. 
A)  money supply, M2. 
B)  average weekly initial claims for disability insurance. 
C)  manufacturers' new orders, nondefense capital goods. 
D)  stock prices, 500 common stocks.

Question 15

As an example of the problem of using only the money supply as a leading indicator, during 1992 if M1 were used as the measure of the money supply rather than M3

Accepted Answer

A)  monetary policy would have been deemed contractionary, deepening the 1990-92 recession. 
B)  monetary policy would have been deemed expansionary, resulting in short-term nominal interest rates of less than zero. 
C)  monetary policy would have been deemed neutral. 
D)  monetary policy would have been deemed expansionary, resulting in short-term real interest rates of less than zero. 
A)  monetary policy would have been deemed contractionary, deepening the 1990-92 recession. 
B)  monetary policy would have been deemed expansionary, resulting in short-term nominal interest rates of less than zero. 
C)  monetary policy would have been deemed neutral. 
D)  monetary policy would have been deemed expansionary, resulting in short-term real interest rates of less than zero.

Question 16

Each of the following is a characteristic of a financial crisis except

Accepted Answer

A)  prices of stocks or of other assets crash. 
B)  everyone tries to move their wealth into safer forms at the same time. 
C)  confidence in the financial system tends to increase. 
D)  panic among investors can lead to a prolonged and serious depression. 
A)  prices of stocks or of other assets crash. 
B)  everyone tries to move their wealth into safer forms at the same time. 
C)  confidence in the financial system tends to increase. 
D)  panic among investors can lead to a prolonged and serious depression.

Question 17

If the Federal Reserve wanted to pursue a contractionary monetary policy, it could

Accepted Answer

A)  raise the discount rate. 
B)  buy U.S. government bonds. 
C)  decrease the reserve requirement. 
D)  raise credit card interest rates. 
A)  raise the discount rate. 
B)  buy U.S. government bonds. 
C)  decrease the reserve requirement. 
D)  raise credit card interest rates.

Question 18

The voting members of the Federal Open Market Committee are

Accepted Answer

A)  the Chair, Vice Chair, and five Governors of the Board of Governors. 
B)  the Chair and Vice Chair of the Board of Governors, and five Presidents of Federal Reserve Banks. 
C)  the Chair, Vice Chair, and five Governors of the Board of Governors and the Presidents of each of the
Federal Reserve Banks. 
D) the Chair, Vice Chair, five Governors, and five Presidents of Federal Reserve Banks, one of which is the President of the New York Federal Reserve Bank. 
A)  the Chair, Vice Chair, and five Governors of the Board of Governors. 
B)  the Chair and Vice Chair of the Board of Governors, and five Presidents of Federal Reserve Banks. 
C)  the Chair, Vice Chair, and five Governors of the Board of Governors and the Presidents of each of the
Federal Reserve Banks. 
D) the Chair, Vice Chair, five Governors, and five Presidents of Federal Reserve Banks, one of which is the President of the New York Federal Reserve Bank.

Question 19

The past forty years have seen the level of Federal Government spending

Accepted Answer

A)  as a share of GDP increase significantly, with the share of national defense and international affairs spending also increasing significantly. 
B)  as a share of GDP remain roughly constant, with the share of Federal welfare spending increasing significantly. 
C)  as a share of GDP remain roughly constant, with the share of national defense and international affairs spending increasing significantly. 
D)  as a share of GDP remain roughly constant, with the share of national defense and international affairs spending decreasing significantly. 
A)  as a share of GDP increase significantly, with the share of national defense and international affairs spending also increasing significantly. 
B)  as a share of GDP remain roughly constant, with the share of Federal welfare spending increasing significantly. 
C)  as a share of GDP remain roughly constant, with the share of national defense and international affairs spending increasing significantly. 
D)  as a share of GDP remain roughly constant, with the share of national defense and international affairs spending decreasing significantly.

Question 20

One country has experienced a liquidity trap problem in the 1990s:

Accepted Answer

A)  the United States. 
B)  Mexico. 
C)  France. 
D)  Japan. 
A)  the United States. 
B)  Mexico. 
C)  France. 
D)  Japan.

Households' and businesses' desired holding ratio of currency-to-deposits until the late-1970s and has _ since then.

Each of the following was a part of the Employment Act of 1946 except

As an example of the problem of using only the money supply as a leading indicator, during 1992 if M3 were used as the measure of the money supply rather than M1

Fiscal policy in the United States today

The controversy over macroeconomic policy can be characterized as a continuum with one end of the spectrum being held by those economists who advocate _, and the other end of the spectrum being held by those economists who advocate _____.

If the reserve requirement is 5%, households' and businesses' desired holding ratio of currency-to-deposits is .1, and the ratio of excess reserves to total deposits that banks desire to hold is .05, the money multiplier is

If _________ is below the target level, the central bank should

An activist central bank concerned with _________ would

The questions with which Chapter 13 is concerned include each of the following except

The Board of Governors of the Federal Reserve is composed of

If the principal instability in the economy is due to instability in the relationship between the monetary base and the money supply (because the currency-to-deposits and reserves-to-deposits ratios vary)

The steps in the Budget Process include each of the following except

If the reserve requirement is 5%, households' and businesses' desired holding ratio of currency-to-deposits is .2, and the Federal Reserve increases the monetary base by $100 billion, the increase in the money supply would be

Each of the following is a component of the Conference Board's Index of Leading Indicators except

As an example of the problem of using only the money supply as a leading indicator, during 1992 if M1 were used as the measure of the money supply rather than M3

Each of the following is a characteristic of a financial crisis except

If the Federal Reserve wanted to pursue a contractionary monetary policy, it could

The voting members of the Federal Open Market Committee are

The past forty years have seen the level of Federal Government spending

One country has experienced a liquidity trap problem in the 1990s:

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 13: Stabilization Policy

Households' and businesses' desired holding ratio of currency-to-deposits __________ until the late-1970s and has ___________ since then.

Each of the following was a part of the Employment Act of 1946 except

As an example of the problem of using only the money supply as a leading indicator, during 1992 if M3 were used as the measure of the money supply rather than M1

Fiscal policy in the United States today

The controversy over macroeconomic policy can be characterized as a continuum with one end of the spectrum being held by those economists who advocate _______________, and the other end of the spectrum being held by those economists who advocate ___________________.

If the reserve requirement is 5%, households' and businesses' desired holding ratio of currency-to-deposits is .1, and the ratio of excess reserves to total deposits that banks desire to hold is .05, the money multiplier is

If _________ is below the target level, the central bank should

An activist central bank concerned with _________ would

The questions with which Chapter 13 is concerned include each of the following except

The Board of Governors of the Federal Reserve is composed of

If the principal instability in the economy is due to instability in the relationship between the monetary base and the money supply (because the currency-to-deposits and reserves-to-deposits ratios vary)

The steps in the Budget Process include each of the following except

If the reserve requirement is 5%, households' and businesses' desired holding ratio of currency-to-deposits is .2, and the Federal Reserve increases the monetary base by $100 billion, the increase in the money supply would be

Each of the following is a component of the Conference Board's Index of Leading Indicators except

As an example of the problem of using only the money supply as a leading indicator, during 1992 if M1 were used as the measure of the money supply rather than M3

Each of the following is a characteristic of a financial crisis except

If the Federal Reserve wanted to pursue a contractionary monetary policy, it could

The voting members of the Federal Open Market Committee are

The past forty years have seen the level of Federal Government spending

One country has experienced a liquidity trap problem in the 1990s:

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Households' and businesses' desired holding ratio of currency-to-deposits until the late-1970s and has _ since then.

The controversy over macroeconomic policy can be characterized as a continuum with one end of the spectrum being held by those economists who advocate _, and the other end of the spectrum being held by those economists who advocate _____.