Question 1

Monetarists think that the Fed should use ________ as a target when conducting monetary policy.

Accepted Answer

A) the money supply 
B) the federal funds rate 
C) the Treasury bill rate 
D) the inflation rate 
E) the unemployment rate 
A) the money supply 
B) the federal funds rate 
C) the Treasury bill rate 
D) the inflation rate 
E) the unemployment rate

Question 2

When Congress established the Federal Reserve in 1913,what was its main responsibility? When did Congress broaden the Fed's responsibilities?

Accepted Answer

When Congress established the Fed in 191

Question 3

Figure 17-12
  
-Refer to Figure 17-12.In the dynamic AD-AS model,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

Accepted Answer

A) firms are producing above capacity. 
B) there is pressure on wages and prices to fall. 
C) the unemployment rate is greater than the natural rate of unemployment. 
D) incomes and profits are falling. 
A) firms are producing above capacity. 
B) there is pressure on wages and prices to fall. 
C) the unemployment rate is greater than the natural rate of unemployment. 
D) incomes and profits are falling.

Question 4

What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?

Accepted Answer

If the Fed believes the economy is about

Question 5

From an initial long-run macroeconomic equilibrium,if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply,then the Federal Reserve would most likely

Accepted Answer

A) decrease interest rates. 
B) increase interest rates. 
C) decrease income tax rates. 
D) increase income tax rates. 
A) decrease interest rates. 
B) increase interest rates. 
C) decrease income tax rates. 
D) increase income tax rates.

Question 6

Table 17-2
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Year } & \text { Potential Real GDP } & \text { Real GDP } & \text { Price Level } \
\hline 2014 & \$ 14.0 \text { trillion } & \$ 14.0 \text { trillion } & 150 \
\hline 2015 & 14.5 \text { trillion } & 14.2 \text { trillion } & 152 \
\hline
\end{array}$$
-Refer to Table 17-2.Consider the hypothetical information in the table above for potential real GDP,real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy.If the Fed wants to keep real GDP at its potential level in 2015,it should

Accepted Answer

A) buy Treasury securities. 
B) sell Treasury securities. 
C) increase the required reserve ratio. 
D) increase income taxes. 
A) buy Treasury securities. 
B) sell Treasury securities. 
C) increase the required reserve ratio. 
D) increase income taxes.

Question 7

Figure 17-7
  
-Refer to Figure 17-7.Suppose the economy is in a recession and no policy is pursued.Using the static AD-AS model in the figure above,this situation would be depicted as a movement from

Accepted Answer

A) A to B. 
B) B to A. 
C) C to B. 
D) A to E. 
E) C to D. 
A) A to B. 
B) B to A. 
C) C to B. 
D) A to E. 
E) C to D.

Question 8

If the Federal Reserve raises or lowers interest rates too late,it could result in a ________ policy that destabilizes the economy.

Accepted Answer

A) fiscal 
B) budgetary 
C) procyclical 
D) countercyclical 
A) fiscal 
B) budgetary 
C) procyclical 
D) countercyclical

Question 9

The dynamic aggregate demand and aggregate supply model accounts for the price level rising every year.

Accepted Answer

A) True 
 B)False

Question 10

Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

Accepted Answer

If the economy is in recession,it is cur

Question 11

By the 2000s,an important change in the mortgage market had occurred when ________ became significant participants in the secondary market for mortgages.

Accepted Answer

A) investment banks 
B) Federal Reserve Banks 
C) commercial banks 
D) savings banks 
A) investment banks 
B) Federal Reserve Banks 
C) commercial banks 
D) savings banks

Question 12

The Federal Reserve could target both the money supply and the interest rate at the same time if it controlled money demand along with money supply.

Accepted Answer

A) True 
 B)False

Question 13

Figure 17-14
  
-Refer to Figure 17-14.In the figure above,if the economy in Year 1 is at point A and expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to

Accepted Answer

A) lower interest rates. 
B) raise interest rates. 
C) lower income taxes. 
D) raise income taxes. 
A) lower interest rates. 
B) raise interest rates. 
C) lower income taxes. 
D) raise income taxes.

Question 14

The money demand curve has a negative slope because

Accepted Answer

A) lower interest rates cause households and firms to switch from money to financial assets. 
B) lower interest rates cause households and firms to switch from financial assets to money. 
C) lower interest rates cause households and firms to switch from money to stocks. 
D) lower interest rates cause households and firms to switch from money to bonds. 
A) lower interest rates cause households and firms to switch from money to financial assets. 
B) lower interest rates cause households and firms to switch from financial assets to money. 
C) lower interest rates cause households and firms to switch from money to stocks. 
D) lower interest rates cause households and firms to switch from money to bonds.

Question 15

Which of the following correctly describes what the Fed used as monetary targets in the past?

Accepted Answer

A) The Fed used M1 and M2 as targets after 1993. 
B) The Fed focused on M1 as a target after deregulation of the financial markets. 
C) The Fed increased its reliance on interest rate targets since the mid-1990s. 
D) After 1980 and before the 1990s, the Fed focused on interest rate targets. 
A) The Fed used M1 and M2 as targets after 1993. 
B) The Fed focused on M1 as a target after deregulation of the financial markets. 
C) The Fed increased its reliance on interest rate targets since the mid-1990s. 
D) After 1980 and before the 1990s, the Fed focused on interest rate targets.

Question 16

Figure 17-11
  
-Refer to Figure 17-11.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

Accepted Answer

A) there is pressure on wages and prices to rise. 
B) the unemployment rate is very, very low. 
C) firms are operating above their normal capacity. 
D) the economy is below full employment. 
E) incomes and profits are rising. 
A) there is pressure on wages and prices to rise. 
B) the unemployment rate is very, very low. 
C) firms are operating above their normal capacity. 
D) the economy is below full employment. 
E) incomes and profits are rising.

Question 17

An increase in real GDP can shift

Accepted Answer

A) money demand to the right and decrease the equilibrium interest rate. 
B) money demand to the right and increase the equilibrium interest rate. 
C) money demand to the left and decrease the equilibrium interest rate. 
D) money demand to the left and increase the equilibrium interest rate. 
A) money demand to the right and decrease the equilibrium interest rate. 
B) money demand to the right and increase the equilibrium interest rate. 
C) money demand to the left and decrease the equilibrium interest rate. 
D) money demand to the left and increase the equilibrium interest rate.

Question 18

Most economists believe that the best monetary policy target is

Accepted Answer

A) an interest rate. 
B) the money supply. 
C) total bank reserves. 
D) the discount rate. 
A) an interest rate. 
B) the money supply. 
C) total bank reserves. 
D) the discount rate.

Question 19

For purposes of monetary policy,the Federal Reserve has targeted the interest rate known as the

Accepted Answer

A) federal funds rate. 
B) Treasury bill rate. 
C) discount rate. 
D) prime rate. 
A) federal funds rate. 
B) Treasury bill rate. 
C) discount rate. 
D) prime rate.

Question 20

Suppose that the economy is producing above potential GDP and the Fed implements the correct change in monetary policy,but not until after the economy has passed the peak of the boom.Then

Accepted Answer

A) the Fed's contractionary policy will result in too large of a decrease in GDP. 
B) the Fed's contractionary policy will result in too small of a decrease in GDP. 
C) the Fed's expansionary policy will result in too small of a decrease in GDP. 
D) the Fed's expansionary policy will result in too large of an increase in GDP. 
A) the Fed's contractionary policy will result in too large of a decrease in GDP. 
B) the Fed's contractionary policy will result in too small of a decrease in GDP. 
C) the Fed's expansionary policy will result in too small of a decrease in GDP. 
D) the Fed's expansionary policy will result in too large of an increase in GDP.

Monetarists think that the Fed should use ________ as a target when conducting monetary policy.

When Congress established the Federal Reserve in 1913,what was its main responsibility? When did Congress broaden the Fed's responsibilities?

Figure 17-12 -Refer to Figure 17-12.In the dynamic AD-AS model,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?

From an initial long-run macroeconomic equilibrium,if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply,then the Federal Reserve would most likely

Figure 17-7 -Refer to Figure 17-7.Suppose the economy is in a recession and no policy is pursued.Using the static AD-AS model in the figure above,this situation would be depicted as a movement from

If the Federal Reserve raises or lowers interest rates too late,it could result in a ________ policy that destabilizes the economy.

The dynamic aggregate demand and aggregate supply model accounts for the price level rising every year.

Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

By the 2000s,an important change in the mortgage market had occurred when ________ became significant participants in the secondary market for mortgages.

The Federal Reserve could target both the money supply and the interest rate at the same time if it controlled money demand along with money supply.

Figure 17-14 -Refer to Figure 17-14.In the figure above,if the economy in Year 1 is at point A and expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to

The money demand curve has a negative slope because

Which of the following correctly describes what the Fed used as monetary targets in the past?

Figure 17-11 -Refer to Figure 17-11.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

An increase in real GDP can shift

Most economists believe that the best monetary policy target is

For purposes of monetary policy,the Federal Reserve has targeted the interest rate known as the

Suppose that the economy is producing above potential GDP and the Fed implements the correct change in monetary policy,but not until after the economy has passed the peak of the boom.Then

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

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Exam 17: Monetary Policy

Monetarists think that the Fed should use ________ as a target when conducting monetary policy.

When Congress established the Federal Reserve in 1913,what was its main responsibility? When did Congress broaden the Fed's responsibilities?

Figure 17-12 -Refer to Figure 17-12.In the dynamic AD-AS model,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?

From an initial long-run macroeconomic equilibrium,if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply,then the Federal Reserve would most likely

Figure 17-7 -Refer to Figure 17-7.Suppose the economy is in a recession and no policy is pursued.Using the static AD-AS model in the figure above,this situation would be depicted as a movement from

If the Federal Reserve raises or lowers interest rates too late,it could result in a ________ policy that destabilizes the economy.

The dynamic aggregate demand and aggregate supply model accounts for the price level rising every year.

Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

By the 2000s,an important change in the mortgage market had occurred when ________ became significant participants in the secondary market for mortgages.

The Federal Reserve could target both the money supply and the interest rate at the same time if it controlled money demand along with money supply.

Figure 17-14 -Refer to Figure 17-14.In the figure above,if the economy in Year 1 is at point A and expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to

The money demand curve has a negative slope because

Which of the following correctly describes what the Fed used as monetary targets in the past?

Figure 17-11 -Refer to Figure 17-11.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

An increase in real GDP can shift

Most economists believe that the best monetary policy target is

For purposes of monetary policy,the Federal Reserve has targeted the interest rate known as the

Suppose that the economy is producing above potential GDP and the Fed implements the correct change in monetary policy,but not until after the economy has passed the peak of the boom.Then

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters