Question 1

If the principal instability in the economy is due to instability in the velocity of money,

Accepted Answer

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

Question 2

If the reserve requirement is 5%, the money multiplier is

Accepted Answer

A)  2. 
B)  20. 
C)  200. 
D)  .2. 
A)  2. 
B)  20. 
C)  200. 
D)  .2.

Question 3

The federal government's year for budget purpose - its fiscal year -

Accepted Answer

A)  runs from October 1 of one year to September 30 of the next year. 
B)  runs from April 16 of one year to April 15 of the next year. 
C)  runs from January 1 of one year to December 31 of the same year. 
D)  runs from July 1 of one year to June 30 of the next year. 
A)  runs from October 1 of one year to September 30 of the next year. 
B)  runs from April 16 of one year to April 15 of the next year. 
C)  runs from January 1 of one year to December 31 of the same year. 
D)  runs from July 1 of one year to June 30 of the next year.

Question 4

If the ratio of excess reserves to total deposits that banks desire to hold decreases,

Accepted Answer

A)  the value of the autonomous spending multiplier will increase. 
B)  the value of the money multiplier will increase. 
C)  the value of the money multiplier will not change. 
D)  the value of the money multiplier will decrease. 
A)  the value of the autonomous spending multiplier will increase. 
B)  the value of the money multiplier will increase. 
C)  the value of the money multiplier will not change. 
D)  the value of the money multiplier will decrease.

Question 5

If the Federal Open Market Committee wishes to increase interest rates,

Accepted Answer

A)  it would buy U.S. government bonds. 
B)  it would sell stocks. 
C)  it would sell U.S. government bonds. 
D)  it would buy municipal bonds. 
A)  it would buy U.S. government bonds. 
B)  it would sell stocks. 
C)  it would sell U.S. government bonds. 
D)  it would buy municipal bonds.

Question 6

Since the 1930s, federal deposit insurance has acted

Accepted Answer

A)  as a fiscal automatic stabilizer. 
B)  as a real automatic stabilizer. 
C)  as a nominal automatic stabilizer. 
D)  as a monetary automatic stabilizer. 
A)  as a fiscal automatic stabilizer. 
B)  as a real automatic stabilizer. 
C)  as a nominal automatic stabilizer. 
D)  as a monetary automatic stabilizer.

Question 7

There is one important restriction on the Federal Reserve's power to set interest rates:

Accepted Answer

A)  it cannot decrease nominal interest rates below the rate of inflation. 
B)  it cannot decrease nominal interest rates below the expected returns on stocks. 
C)  it cannot decrease nominal interest rates below zero. 
D)  it cannot affect long-term interest rates. 
A)  it cannot decrease nominal interest rates below the rate of inflation. 
B)  it cannot decrease nominal interest rates below the expected returns on stocks. 
C)  it cannot decrease nominal interest rates below zero. 
D)  it cannot affect long-term interest rates.

Question 8

An activist central bank concerned with _________ would

Accepted Answer

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

Question 9

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

Accepted Answer

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

Question 10

Fiscal and monetary policy, along with the economic environment,

Accepted Answer

A)  set the level of aggregate supply and move the economy along the Phillips curve, raising and lowering inflation and unemployment. 
B)  set the level of planned expenditure and move the economy along the Phillips curve, raising and lowering inflation and unemployment. 
C)  set the level of aggregate supply and move the economy along the monetary policy reaction curve, raising and lowering inflation and unemployment. 
D)  set the level of planned expenditure and move the economy along the planned expenditure curve, raising and lowering inflation and unemployment. 
A)  set the level of aggregate supply and move the economy along the Phillips curve, raising and lowering inflation and unemployment. 
B)  set the level of planned expenditure and move the economy along the Phillips curve, raising and lowering inflation and unemployment. 
C)  set the level of aggregate supply and move the economy along the monetary policy reaction curve, raising and lowering inflation and unemployment. 
D)  set the level of planned expenditure and move the economy along the planned expenditure curve, raising and lowering inflation and unemployment.

Question 11

The principal policy-making body of the Federal Reserve System is

Accepted Answer

A)  the Federal Open Records Committee. 
B)  the Federal Open Market Committee. 
C)  the Senate Finance Committee. 
D)  the House Appropriations Committee. 
A)  the Federal Open Records Committee. 
B)  the Federal Open Market Committee. 
C)  the Senate Finance Committee. 
D)  the House Appropriations Committee.

Question 12

The velocity of money since 1980 has been

Accepted Answer

A)  unstable and predictable around a steady upward trend. 
B)  unstable and unpredictable without any discernable trend. 
C)  stable and predictable with a constant downward trend. 
D)  stable and predictable with a constant upward trend. 
A)  unstable and predictable around a steady upward trend. 
B)  unstable and unpredictable without any discernable trend. 
C)  stable and predictable with a constant downward trend. 
D)  stable and predictable with a constant upward trend.

Question 13

A big problem with using only the money supply as a leading indicator is that

Accepted Answer

A)  money supply changes lag behind fiscal policy changes. 
B)  money supply changes are hard to implement. 
C)  there is more one money supply measure, and the different measures don't always move together. 
D)  money supply changes don't have much impact on the economy. 
A)  money supply changes lag behind fiscal policy changes. 
B)  money supply changes are hard to implement. 
C)  there is more one money supply measure, and the different measures don't always move together. 
D)  money supply changes don't have much impact on the economy.

Question 14

Between 1967 and 1975 in the United States,

Accepted Answer

A)  the natural rate of unemployment decreased and expected inflation increased. 
B)  the natural rate of unemployment and expected inflation increased. 
C)  the natural rate of unemployment increased and expected inflation decreased. 
D)  the natural rate of unemployment and expected inflation decreased. 
A)  the natural rate of unemployment decreased and expected inflation increased. 
B)  the natural rate of unemployment and expected inflation increased. 
C)  the natural rate of unemployment increased and expected inflation decreased. 
D)  the natural rate of unemployment and expected inflation decreased.

Question 15

If the Federal Reserve increases the monetary base,

Accepted Answer

A)  the value of the money multiplier will increase. 
B)  the value of the money multiplier will decrease. 
C)  the value of the money multiplier will not change. 
D)  the value of the autonomous spending multiplier will decrease. 
A)  the value of the money multiplier will increase. 
B)  the value of the money multiplier will decrease. 
C)  the value of the money multiplier will not change. 
D)  the value of the autonomous spending multiplier will decrease.

Question 16

Changes in monetary policy

Accepted Answer

A)  shift the IS curve. 
B)  shift the Phillips curve. 
C)  shift the MPRF curve out and back. 
D)  move the economy along the MPRF curve. 
A)  shift the IS curve. 
B)  shift the Phillips curve. 
C)  shift the MPRF curve out and back. 
D)  move the economy along the MPRF curve.

Question 17

If the reserve requirement is 5%, households' and businesses' desired holding ratio of currency-to-deposits is .1, the ratio of excess reserves to total deposits that banks desire to hold is .05, and the Federal Reserve increases the monetary base by $100 billion, the increase in the money supply would be

Accepted Answer

A)  $500 billion. 
B)  $220 billion. 
C)  $550 billion. 
D)  $2200 billion. 
A)  $500 billion. 
B)  $220 billion. 
C)  $550 billion. 
D)  $2200 billion.

Question 18

If the Federal Reserve decreases the reserve requirement,

Accepted Answer

A)  the value of the money multiplier will increase. 
B)  the value of the money multiplier will decrease. 
C)  the value of the autonomous spending multiplier will increase. 
D)  the value of the autonomous spending multiplier will decrease. 
A)  the value of the money multiplier will increase. 
B)  the value of the money multiplier will decrease. 
C)  the value of the autonomous spending multiplier will increase. 
D)  the value of the autonomous spending multiplier will decrease.

Question 19

The automatic revenue and spending changes built into the federal budget have the effect of

Accepted Answer

A)  increasing the marginal propensity to expend, thus reducing the value of the multiplier. 
B)  reducing the marginal propensity to expend, this reducing the value of the multiplier. 
C)  reducing the marginal propensity to expend, this increasing the value of the multiplier. 
D)  increasing the marginal propensity to expend, this increasing the value of the multiplier. 
A)  increasing the marginal propensity to expend, thus reducing the value of the multiplier. 
B)  reducing the marginal propensity to expend, this reducing the value of the multiplier. 
C)  reducing the marginal propensity to expend, this increasing the value of the multiplier. 
D)  increasing the marginal propensity to expend, this increasing the value of the multiplier.

Question 20

Stagflation means

Accepted Answer

A)  a combination of relatively low unemployment and low inflation. 
B)  a combination of relatively low unemployment and high inflation. 
C)  a combination of relatively high unemployment and high inflation. 
D)  a combination of relatively high unemployment and low inflation. 
A)  a combination of relatively low unemployment and low inflation. 
B)  a combination of relatively low unemployment and high inflation. 
C)  a combination of relatively high unemployment and high inflation. 
D)  a combination of relatively high unemployment and low inflation.

If the principal instability in the economy is due to instability in the velocity of money,

If the reserve requirement is 5%, the money multiplier is

The federal government's year for budget purpose - its fiscal year -

If the ratio of excess reserves to total deposits that banks desire to hold decreases,

If the Federal Open Market Committee wishes to increase interest rates,

Since the 1930s, federal deposit insurance has acted

There is one important restriction on the Federal Reserve's power to set interest rates:

An activist central bank concerned with _________ would

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

Fiscal and monetary policy, along with the economic environment,

The principal policy-making body of the Federal Reserve System is

The velocity of money since 1980 has been

A big problem with using only the money supply as a leading indicator is that

Between 1967 and 1975 in the United States,

If the Federal Reserve increases the monetary base,

Changes in monetary policy

If the Federal Reserve decreases the reserve requirement,

The automatic revenue and spending changes built into the federal budget have the effect of

Stagflation means

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

If the principal instability in the economy is due to instability in the velocity of money,

If the reserve requirement is 5%, the money multiplier is

The federal government's year for budget purpose - its fiscal year -

If the ratio of excess reserves to total deposits that banks desire to hold decreases,

If the Federal Open Market Committee wishes to increase interest rates,

Since the 1930s, federal deposit insurance has acted

There is one important restriction on the Federal Reserve's power to set interest rates:

An activist central bank concerned with _________ would

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

Fiscal and monetary policy, along with the economic environment,

The principal policy-making body of the Federal Reserve System is

The velocity of money since 1980 has been

A big problem with using only the money supply as a leading indicator is that

Between 1967 and 1975 in the United States,

If the Federal Reserve increases the monetary base,

Changes in monetary policy

If the Federal Reserve decreases the reserve requirement,

The automatic revenue and spending changes built into the federal budget have the effect of

Stagflation means

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