Question 1

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 2

Contractionary monetary policy on the part of the Fed results in

Accepted Answer

A)  an increase in the money supply, an increase in interest rates, and an increase in GDP. 
B)  a decrease in the money supply, an increase in interest rates, and a decrease in GDP. 
C)  an increase in the money supply, a decrease in interest rates, and an increase in GDP. 
D)  a decrease in the money supply, a decrease in interest rates, and a decrease in GDP. 
A)  an increase in the money supply, an increase in interest rates, and an increase in GDP. 
B)  a decrease in the money supply, an increase in interest rates, and a decrease in GDP. 
C)  an increase in the money supply, a decrease in interest rates, and an increase in GDP. 
D)  a decrease in the money supply, a decrease in interest rates, and a decrease in GDP.

Question 3

The Taylor rule links the Federal Reserve's target for the

Accepted Answer

A)  money supply to shifts in money demand. 
B)  money supply to changes in interest rates. 
C)  federal funds rate to economic variables. 
D)  federal funds rate to the money supply. 
A)  money supply to shifts in money demand. 
B)  money supply to changes in interest rates. 
C)  federal funds rate to economic variables. 
D)  federal funds rate to the money supply.

Question 4

In the following table,fill in the columns for your return on investment if the price of your house increased or decreased by 20 percent,based on the down payments specified in the first column.
Return on Your Investment From…

Accepted Answer

Return on

Question 5

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be relatively ________ and real GDP to be relatively ________.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower 
A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 6

Most of the pressure for a monetary growth rule has disappeared because since 1980,

Accepted Answer

A)  the relationship between movements in the money supply and movements in real GDP and the price level have become much stronger. 
B)  the relationship between movements in the money supply and movements in real GDP and the price level have become much weaker. 
C)  the relationship between movements in interest rates and movements in real GDP and the price level have become much stronger. 
D)  the relationship between movements in interest rates and movements in real GDP and the price level have become much weaker. 
A)  the relationship between movements in the money supply and movements in real GDP and the price level have become much stronger. 
B)  the relationship between movements in the money supply and movements in real GDP and the price level have become much weaker. 
C)  the relationship between movements in interest rates and movements in real GDP and the price level have become much stronger. 
D)  the relationship between movements in interest rates and movements in real GDP and the price level have become much weaker.

Question 7

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

Question 8

What is a banking panic,and what role did banking panics play in the decision by Congress to establish the Federal Reserve?

Accepted Answer

When the Fed was founded,its primary res

Question 9

When the Federal Reserve System was established in 1913,its main policy goal was

Accepted Answer

A)  encouraging strong economic growth. 
B)  promoting price stability. 
C)  preventing bank panics. 
D)  keeping employment high. 
A)  encouraging strong economic growth. 
B)  promoting price stability. 
C)  preventing bank panics. 
D)  keeping employment high.

Question 10

With a monetary growth rule as proposed by the monetarists,during a recession the rate of growth of the money supply would

Accepted Answer

A)  decrease. 
B)  increase. 
C)  not change. 
D)  decrease or increase depending on economic conditions. 
A)  decrease. 
B)  increase. 
C)  not change. 
D)  decrease or increase depending on economic conditions.

Question 11

Changes in the federal funds rate usually result in

Accepted Answer

A)  changes in both short-term and long-term interest rates with more of an effect on short-term interest rates. 
B)  changes in both short-term and long-term interest rates with more of an effect on long-term interest rates. 
C)  changes in both short-term and long-term interest rates with equal effect on both. 
D)  no change in both short-term and long-term interest rates. 
A)  changes in both short-term and long-term interest rates with more of an effect on short-term interest rates. 
B)  changes in both short-term and long-term interest rates with more of an effect on long-term interest rates. 
C)  changes in both short-term and long-term interest rates with equal effect on both. 
D)  no change in both short-term and long-term interest rates.

Question 12

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 a contractionary monetary policy.Briefly explain the condition of the economy and what the Federal Reserve is attempting to do.

Accepted Answer

The Federal Reserve conducts a contracti

Question 13

In September 2011,the Fed announced a new policy in which it would invest in additional mortgage-backed securities in an attempt to further reduce mortgage rates and boost the housing market.Lower mortgage rates should lead to an increase in refinancing,which should ________ disposable income and therefore ________ aggregate demand.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 14

Since 2000,the Fed uses ________ to measure inflation.

Accepted Answer

A)  the index of leading economic indicators 
B)  the personal consumption expenditures index 
C)  the consumer price index 
D)  the GDP deflator 
E)  the producer price index 
A)  the index of leading economic indicators 
B)  the personal consumption expenditures index 
C)  the consumer price index 
D)  the GDP deflator 
E)  the producer price index

Question 15

Refer to Figure 26-5.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 16

Figure 26-4
  
-Refer to Figure 26-4.In the figure above,if the economy is at point A,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 17

The economy suffered a mild recession in 2001.Despite the recession,home sales and durable goods sales remained high.Which of the following is a plausible explanation?

Accepted Answer

A)  The Fed's pursuit of contractionary policy stimulated these markets. 
B)  The Fed caused a reduction in the federal funds rate to its lowest level in 40 years. 
C)  Rising inflation encouraged many to invest in the real estate market. 
D)  Home building and consumer durable purchases are always high during a recession. 
A)  The Fed's pursuit of contractionary policy stimulated these markets. 
B)  The Fed caused a reduction in the federal funds rate to its lowest level in 40 years. 
C)  Rising inflation encouraged many to invest in the real estate market. 
D)  Home building and consumer durable purchases are always high during a recession.

Question 18

The situation in which short-term interest rates are pushed to zero,leaving the central bank unable to lower them further is known as

Accepted Answer

A)  the Taylor rule. 
B)  a liquidity trap. 
C)  a zero-sum game. 
D)  an interest rate panic. 
A)  the Taylor rule. 
B)  a liquidity trap. 
C)  a zero-sum game. 
D)  an interest rate panic.

Question 19

The Fed can directly lower the inflation rate.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

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

Contractionary monetary policy on the part of the Fed results in

The Taylor rule links the Federal Reserve's target for the

In the following table,fill in the columns for your return on investment if the price of your house increased or decreased by 20 percent,based on the down payments specified in the first column. Return on Your Investment From…

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be relatively and real GDP to be relatively .

Most of the pressure for a monetary growth rule has disappeared because since 1980,

What is a banking panic,and what role did banking panics play in the decision by Congress to establish the Federal Reserve?

When the Federal Reserve System was established in 1913,its main policy goal was

With a monetary growth rule as proposed by the monetarists,during a recession the rate of growth of the money supply would

Changes in the federal funds rate usually result in

Since 2000,the Fed uses ________ to measure inflation.

Refer to Figure 26-5.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

Figure 26-4 -Refer to Figure 26-4.In the figure above,if the economy is at point A,the appropriate monetary policy by the Federal Reserve would be to

The economy suffered a mild recession in 2001.Despite the recession,home sales and durable goods sales remained high.Which of the following is a plausible explanation?

The situation in which short-term interest rates are pushed to zero,leaving the central bank unable to lower them further is known as

The Fed can directly lower the inflation rate.

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 15: Monetary Policy

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

Contractionary monetary policy on the part of the Fed results in

The Taylor rule links the Federal Reserve's target for the

In the following table,fill in the columns for your return on investment if the price of your house increased or decreased by 20 percent,based on the down payments specified in the first column. Return on Your Investment From…

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be relatively ________ and real GDP to be relatively ________.

Most of the pressure for a monetary growth rule has disappeared because since 1980,

What is a banking panic,and what role did banking panics play in the decision by Congress to establish the Federal Reserve?

When the Federal Reserve System was established in 1913,its main policy goal was

With a monetary growth rule as proposed by the monetarists,during a recession the rate of growth of the money supply would

Changes in the federal funds rate usually result in

Since 2000,the Fed uses ________ to measure inflation.

Refer to Figure 26-5.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

Figure 26-4 -Refer to Figure 26-4.In the figure above,if the economy is at point A,the appropriate monetary policy by the Federal Reserve would be to

The economy suffered a mild recession in 2001.Despite the recession,home sales and durable goods sales remained high.Which of the following is a plausible explanation?

The situation in which short-term interest rates are pushed to zero,leaving the central bank unable to lower them further is known as

The Fed can directly lower the inflation rate.

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be relatively and real GDP to be relatively .