Question 1

When the Federal Reserve increases the money supply,people spend more because they now have more money.

Accepted Answer

A) True 
 B)False

Question 2

In October 2008,Congress passed the ________,under which the Treasury provided funds to banks in exchange for stock.

Accepted Answer

A) Bank Rescue Alliance Treaty (BRAT) 
B) Mortgage Transfer Agency (MT
A)  
C) Troubled Asset Relief Program (TARP) 
D) Financial Assurance Association (FA
A)  
A) Bank Rescue Alliance Treaty (BRAT) 
B) Mortgage Transfer Agency (MT
A)  
C) Troubled Asset Relief Program (TARP) 
D) Financial Assurance Association (FA
A)

Question 3

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 uses monetary policy successfully to keep real GDP at its potential level in 2015,which of the following will be higher than if the Fed had taken no action?

Accepted Answer

A) real GDP and the unemployment rate 
B) real GDP and the inflation rate 
C) real GDP and potential GDP 
D) potential GDP and the inflation rate 
A) real GDP and the unemployment rate 
B) real GDP and the inflation rate 
C) real GDP and potential GDP 
D) potential GDP and the inflation rate

Question 4

The Fed seeks to promote stability of financial markets because

Accepted Answer

A) they want to lift the self-esteem of workers. 
B) Congress directed them to do so by the Employment Act of 1946. 
C) resources are lost when there is not an efficient matching of savers and borrowers. 
D) unstable markets result in increased efficiency. 
A) they want to lift the self-esteem of workers. 
B) Congress directed them to do so by the Employment Act of 1946. 
C) resources are lost when there is not an efficient matching of savers and borrowers. 
D) unstable markets result in increased efficiency.

Question 5

Figure 17-2
  
-Refer to Figure 17-2.In the figure above,the movement from point A to point B in the money market would be caused by

Accepted Answer

A) an increase in the price level. 
B) a decrease in real GDP. 
C) an open market sale of Treasury securities by the Federal Reserve. 
D) a decrease in the required reserve ratio by the Federal Reserve. 
A) an increase in the price level. 
B) a decrease in real GDP. 
C) an open market sale of Treasury securities by the Federal Reserve. 
D) a decrease in the required reserve ratio by the Federal Reserve.

Question 6

Under the monetary growth rule proposed by the monetarists,the money supply would grow each year at a constant rate equal to the long-run rate of growth of

Accepted Answer

A) inflation. 
B) real GDP. 
C) interest rates. 
D) employment. 
A) inflation. 
B) real GDP. 
C) interest rates. 
D) employment.

Question 7

A monetary growth rule means that

Accepted Answer

A) the Fed will lower interest rates if it thinks a recession is on the horizon. 
B) the Fed will raise interest rates if it thinks the economy is growing faster than potential. 
C) the money supply should grow at a constant rate. 
D) the money supply should grow in response to economic conditions. 
A) the Fed will lower interest rates if it thinks a recession is on the horizon. 
B) the Fed will raise interest rates if it thinks the economy is growing faster than potential. 
C) the money supply should grow at a constant rate. 
D) the money supply should grow in response to economic conditions.

Question 8

The rate of interest banks charge other banks for overnight loans of reserves is the

Accepted Answer

A) discount rate. 
B) prime rate. 
C) federal funds rate 
D) real rate. 
A) discount rate. 
B) prime rate. 
C) federal funds rate 
D) real rate.

Question 9

When the Federal Reserve decreases the money supply,at the previous equilibrium interest rate households and firms will now want to

Accepted Answer

A) buy Treasury bills. 
B) sell Treasury bills. 
C) neither buy nor sell Treasury bills. 
D) hold less money. 
A) buy Treasury bills. 
B) sell Treasury bills. 
C) neither buy nor sell Treasury bills. 
D) hold less money.

Question 10

The Taylor rule accurately predicted the changes in the federal funds target during the period

Accepted Answer

A) when Alan Greenspan was the chairman of the Federal Reserve Board. 
B) when Paul Volcker was the chairman of the Federal Reserve Board. 
C) when Arthur Burns was the chairman of the Federal Reserve Board. 
D) when William McChesney Martin was the chairman of the Federal Reserve Board. 
A) when Alan Greenspan was the chairman of the Federal Reserve Board. 
B) when Paul Volcker was the chairman of the Federal Reserve Board. 
C) when Arthur Burns was the chairman of the Federal Reserve Board. 
D) when William McChesney Martin was the chairman of the Federal Reserve Board.

Question 11

According to the Taylor rule,does the target for the federal funds rate respond differently for an increase in inflation caused by an increase in aggregate demand and for an increase in inflation caused by a decrease in short-run aggregate supply? Explain whether there is or is not a difference in how the target for the federal funds rate changes.

Accepted Answer

The target for the federal funds rate re

Question 12

Does the money demand curve have a positive slope or a negative slope? Why does it have this slope? Explain why an increase in the variable on the vertical axis of the money demand curve causes either an increase or a decrease in the variable on the horizontal axis of the money demand curve.

Accepted Answer

The money demand curve has a negative sl

Question 13

Since World War II,the Federal Reserve has not been involved in carrying out monetary policy.

Accepted Answer

A) True 
 B)False

Question 14

List the Fed's four main monetary goals.

Accepted Answer

1.Price stability
2.High emplo

Question 15

A monetary policy target is a variable that

Accepted Answer

A) the Fed can affect directly. 
B) equals one of the Fed's main policy goals. 
C) the Fed has no ability to change. 
D) the Fed cannot affect directly. 
A) the Fed can affect directly. 
B) equals one of the Fed's main policy goals. 
C) the Fed has no ability to change. 
D) the Fed cannot affect directly.

Question 16

Although the Federal Reserve had traditionally made discount loans only to ________,in response to to the financial crisis in 2008 the Fed made primary dealers eligible for discount loans as well.

Accepted Answer

A) commercial banks 
B) government agencies 
C) investment banks 
D) mortgage lenders 
A) commercial banks 
B) government agencies 
C) investment banks 
D) mortgage lenders

Question 17

Firms that participate in regular open market transactions with the Federal Reserve are called

Accepted Answer

A) secondary market banks. 
B) Treasury banks. 
C) primary dealers. 
D) Federal Reserve partners. 
A) secondary market banks. 
B) Treasury banks. 
C) primary dealers. 
D) Federal Reserve partners.

Question 18

Federal Reserve Board Chairmen Paul Volcker,Alan Greenspan,and Ben Bernanke all have focused on which of the following as their main goal of monetary policy?

Accepted Answer

A) high employment 
B) price stability 
C) economic growth 
D) stability of financial markets 
A) high employment 
B) price stability 
C) economic growth 
D) stability of financial markets

Question 19

In recent years,a monetary growth rule has fallen out of favor because

Accepted Answer

A) it is believed that active monetary policy destabilizes the economy and makes the business cycle worse. 
B) the growth rate of GDP has been highly unstable. 
C) the close relationship between movements in M1 and movements in real GDP has become weaker. 
D) the growth rate of M1 has become more stable. 
A) it is believed that active monetary policy destabilizes the economy and makes the business cycle worse. 
B) the growth rate of GDP has been highly unstable. 
C) the close relationship between movements in M1 and movements in real GDP has become weaker. 
D) the growth rate of M1 has become more stable.

Question 20

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the Federal Reserve to conduct an expansionary monetary policy.Briefly explain the condition of the economy and what the Federal Reserve is attempting to do.

Accepted Answer

The Federal Reserve conducts an expansio

When the Federal Reserve increases the money supply,people spend more because they now have more money.

In October 2008,Congress passed the ________,under which the Treasury provided funds to banks in exchange for stock.

The Fed seeks to promote stability of financial markets because

Figure 17-2 -Refer to Figure 17-2.In the figure above,the movement from point A to point B in the money market would be caused by

Under the monetary growth rule proposed by the monetarists,the money supply would grow each year at a constant rate equal to the long-run rate of growth of

A monetary growth rule means that

The rate of interest banks charge other banks for overnight loans of reserves is the

When the Federal Reserve decreases the money supply,at the previous equilibrium interest rate households and firms will now want to

The Taylor rule accurately predicted the changes in the federal funds target during the period

Does the money demand curve have a positive slope or a negative slope? Why does it have this slope? Explain why an increase in the variable on the vertical axis of the money demand curve causes either an increase or a decrease in the variable on the horizontal axis of the money demand curve.

Since World War II,the Federal Reserve has not been involved in carrying out monetary policy.

List the Fed's four main monetary goals.

A monetary policy target is a variable that

Although the Federal Reserve had traditionally made discount loans only to ________,in response to to the financial crisis in 2008 the Fed made primary dealers eligible for discount loans as well.

Firms that participate in regular open market transactions with the Federal Reserve are called

Federal Reserve Board Chairmen Paul Volcker,Alan Greenspan,and Ben Bernanke all have focused on which of the following as their main goal of monetary policy?

In recent years,a monetary growth rule has fallen out of favor because

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

Exam 17: Monetary Policy

When the Federal Reserve increases the money supply,people spend more because they now have more money.

In October 2008,Congress passed the ________,under which the Treasury provided funds to banks in exchange for stock.

The Fed seeks to promote stability of financial markets because

Figure 17-2 -Refer to Figure 17-2.In the figure above,the movement from point A to point B in the money market would be caused by

Under the monetary growth rule proposed by the monetarists,the money supply would grow each year at a constant rate equal to the long-run rate of growth of

A monetary growth rule means that

The rate of interest banks charge other banks for overnight loans of reserves is the

When the Federal Reserve decreases the money supply,at the previous equilibrium interest rate households and firms will now want to

The Taylor rule accurately predicted the changes in the federal funds target during the period

Does the money demand curve have a positive slope or a negative slope? Why does it have this slope? Explain why an increase in the variable on the vertical axis of the money demand curve causes either an increase or a decrease in the variable on the horizontal axis of the money demand curve.

Since World War II,the Federal Reserve has not been involved in carrying out monetary policy.

List the Fed's four main monetary goals.

A monetary policy target is a variable that

Although the Federal Reserve had traditionally made discount loans only to ________,in response to to the financial crisis in 2008 the Fed made primary dealers eligible for discount loans as well.

Firms that participate in regular open market transactions with the Federal Reserve are called

Federal Reserve Board Chairmen Paul Volcker,Alan Greenspan,and Ben Bernanke all have focused on which of the following as their main goal of monetary policy?

In recent years,a monetary growth rule has fallen out of favor because

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