Question 1

Ceteris paribus,an increase in the money supply will lower short-term interest rates.

Accepted Answer

A) True 
 B)False

Question 2

How do economists generally rate the Fed's performance in the 1980s,1990s,and the early 2000s? Has the public been supportive of their policies? Is there anything on the horizon for the Fed that might cause the public concern?

Accepted Answer

Economists rate the Feds performance qui

Question 3

Increases in the price level

Accepted Answer

A)  increase the opportunity cost of holding money. 
B)  decrease the opportunity cost of holding money. 
C)  increase the quantity of money needed for buying and selling. 
D)  decrease the quantity of money needed for buying and selling. 
A)  increase the opportunity cost of holding money. 
B)  decrease the opportunity cost of holding money. 
C)  increase the quantity of money needed for buying and selling. 
D)  decrease the quantity of money needed for buying and selling.

Question 4

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 5

If the Fed raises the interest rate,this will ________ inflation and ________ real GDP in the short run.

Accepted Answer

A)  reduce; raise 
B)  increase; lower 
C)  increase; raise 
D)  reduce; lower 
A)  reduce; raise 
B)  increase; lower 
C)  increase; raise 
D)  reduce; lower

Question 6

Figure 26-11
  
-Refer to Figure 26-11.In the figure above,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Federal Reserve use to move the economy to point C?

Accepted Answer

A)  decrease income taxes 
B)  decrease the required-reserve ratio 
C)  buy Treasury bills 
D)  sell Treasury bills 
A)  decrease income taxes 
B)  decrease the required-reserve ratio 
C)  buy Treasury bills 
D)  sell Treasury bills

Question 7

What is a mortgage? What were the important developments in the mortgage market during the years after 1970?

Accepted Answer

A mortgage is a loan a borrower takes to

Question 8

The consumer price index (CPI),the personal consumption expenditures price index (PCE),and the core PCE have over the last 10 years

Accepted Answer

A)  moved roughly together with the CPI being the most stable. 
B)  moved roughly together with the PCE being the most stable. 
C)  moved roughly together with the core PCE being the most stable. 
D)  not moved together, with the CPI being the most stable. 
A)  moved roughly together with the CPI being the most stable. 
B)  moved roughly together with the PCE being the most stable. 
C)  moved roughly together with the core PCE being the most stable. 
D)  not moved together, with the CPI being the most stable.

Question 9

The federal funds rate is

Accepted Answer

A)  the interest rate the Fed charges commercial banks. 
B)  the interest rate a bank charges its best customers. 
C)  the interest rate banks charge each other for overnight loans. 
D)  the interest rate on a Treasury Bill. 
A)  the interest rate the Fed charges commercial banks. 
B)  the interest rate a bank charges its best customers. 
C)  the interest rate banks charge each other for overnight loans. 
D)  the interest rate on a Treasury Bill.

Question 10

Inflation targeting,typically,has been accompanied by lower inflation.

Accepted Answer

A) True 
 B)False

Question 11

The Federal Reserve responded to the 2008 financial crisis in several ways. Which of the following is one of the ways the Fed responded?

Accepted Answer

A)  The Fed banned investment banks from obtaining discount loans. 
B)  The Fed lent investment banks Treasury securities in exchange for mortgage-backed securities. 
C)  The Fed lowered the required reserve ratio on demand deposit accounts in order to increase the amount of bank reserves. 
D)  The Fed helped Citibank to acquire General Motors and Chrysler. 
A)  The Fed banned investment banks from obtaining discount loans. 
B)  The Fed lent investment banks Treasury securities in exchange for mortgage-backed securities. 
C)  The Fed lowered the required reserve ratio on demand deposit accounts in order to increase the amount of bank reserves. 
D)  The Fed helped Citibank to acquire General Motors and Chrysler.

Question 12

When the price of a financial asset ________ its interest rate will ________.

Accepted Answer

A)  rises; rise 
B)  falls; fall 
C)  falls; rise 
D)  rises; remain the same 
A)  rises; rise 
B)  falls; fall 
C)  falls; rise 
D)  rises; remain the same

Question 13

Figure 26-8
  
-Refer to Figure 26-8.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 federal funds rate

Accepted Answer

A)  is determined administratively by the Fed. 
B)  is determined by the supply of and demand for bank reserves. 
C)  is determined directly by household demand for funds. 
D)  is determined directly by firm demand for funds. 
A)  is determined administratively by the Fed. 
B)  is determined by the supply of and demand for bank reserves. 
C)  is determined directly by household demand for funds. 
D)  is determined directly by firm demand for funds.

Question 15

Suppose that the economy is producing below potential GDP and the Fed implements the correct change in monetary policy,but not until after the economy has passed the trough of the recession.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.

Question 16

The Fed's two main monetary policy targets are

Accepted Answer

A)  the money supply and the inflation rate. 
B)  the money supply and the interest rate. 
C)  the interest rate and real GDP. 
D)  the inflation rate and real GDP. 
A)  the money supply and the inflation rate. 
B)  the money supply and the interest rate. 
C)  the interest rate and real GDP. 
D)  the inflation rate and real GDP.

Question 17

Figure 26-7
  
-Refer to Figure 26-7.In the figure above,suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?

Accepted Answer

A)  an increase in income taxes 
B)  a decrease in the required reserve ratio 
C)  an open market purchase of Treasury bills 
D)  an open market sale of Treasury bills 
A)  an increase in income taxes 
B)  a decrease in the required reserve ratio 
C)  an open market purchase of Treasury bills 
D)  an open market sale of Treasury bills

Question 18

The argument advanced by Milton Friedman for adopting a monetary growth rule is that

Accepted Answer

A)  active monetary policy potentially destabilizes the economy. 
B)  the Fed can control the money supply, but not the level of interest rates. 
C)  a constant rate of growth in the money supply would eliminate the booms and recessions that make up the business cycle. 
D)  the growth rate of M1 has been unstable. 
A)  active monetary policy potentially destabilizes the economy. 
B)  the Fed can control the money supply, but not the level of interest rates. 
C)  a constant rate of growth in the money supply would eliminate the booms and recessions that make up the business cycle. 
D)  the growth rate of M1 has been unstable.

Question 19

When housing prices ________,as they did beginning in 2006 following the housing market bubble,consumption spending on furniture,appliances,and home improvements declined as many households found it ________ to borrow against the value of their homes.

Accepted Answer

A)  rise; easier 
B)  rise; harder 
C)  fall; easier 
D)  fall; harder 
A)  rise; easier 
B)  rise; harder 
C)  fall; easier 
D)  fall; harder

Question 20

By the height of the housing bubble in 2005 and early 2006,lenders had greatly loosened the standards for obtaining a mortgage loan,with many mortgages being granted to sub-prime borrowers ________ and "Alt-A" borrowers ________.

Accepted Answer

A)  with flawed credit histories; who did not document their incomes 
B)  who borrowed money at rates below the prime interest rate; who had AAA credit ratings 
C)  who borrowed more than 120 percent of the value of the house; with no proof of U.S. citizenship 
D)  who purchased homes in depressed housing markets; who purchased homes which were repossessed by government agencies. 
A)  with flawed credit histories; who did not document their incomes 
B)  who borrowed money at rates below the prime interest rate; who had AAA credit ratings 
C)  who borrowed more than 120 percent of the value of the house; with no proof of U.S. citizenship 
D)  who purchased homes in depressed housing markets; who purchased homes which were repossessed by government agencies.

Ceteris paribus,an increase in the money supply will lower short-term interest rates.

How do economists generally rate the Fed's performance in the 1980s,1990s,and the early 2000s? Has the public been supportive of their policies? Is there anything on the horizon for the Fed that might cause the public concern?

Increases in the price level

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

If the Fed raises the interest rate,this will inflation and real GDP in the short run.

Figure 26-11 -Refer to Figure 26-11.In the figure above,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Federal Reserve use to move the economy to point C?

What is a mortgage? What were the important developments in the mortgage market during the years after 1970?

The consumer price index (CPI),the personal consumption expenditures price index (PCE),and the core PCE have over the last 10 years

The federal funds rate is

Inflation targeting,typically,has been accompanied by lower inflation.

The Federal Reserve responded to the 2008 financial crisis in several ways. Which of the following is one of the ways the Fed responded?

When the price of a financial asset its interest rate will .

Figure 26-8 -Refer to Figure 26-8.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 federal funds rate

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

The Fed's two main monetary policy targets are

Figure 26-7 -Refer to Figure 26-7.In the figure above,suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?

The argument advanced by Milton Friedman for adopting a monetary growth rule is that

When housing prices ,as they did beginning in 2006 following the housing market bubble,consumption spending on furniture,appliances,and home improvements declined as many households found it to borrow against the value of their homes.

By the height of the housing bubble in 2005 and early 2006,lenders had greatly loosened the standards for obtaining a mortgage loan,with many mortgages being granted to sub-prime borrowers and "Alt-A" borrowers .

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

Ceteris paribus,an increase in the money supply will lower short-term interest rates.

How do economists generally rate the Fed's performance in the 1980s,1990s,and the early 2000s? Has the public been supportive of their policies? Is there anything on the horizon for the Fed that might cause the public concern?

Increases in the price level

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

If the Fed raises the interest rate,this will ________ inflation and ________ real GDP in the short run.

Figure 26-11 -Refer to Figure 26-11.In the figure above,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Federal Reserve use to move the economy to point C?

What is a mortgage? What were the important developments in the mortgage market during the years after 1970?

The consumer price index (CPI),the personal consumption expenditures price index (PCE),and the core PCE have over the last 10 years

The federal funds rate is

Inflation targeting,typically,has been accompanied by lower inflation.

The Federal Reserve responded to the 2008 financial crisis in several ways. Which of the following is one of the ways the Fed responded?

When the price of a financial asset ________ its interest rate will ________.

Figure 26-8 -Refer to Figure 26-8.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 federal funds rate

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

The Fed's two main monetary policy targets are

Figure 26-7 -Refer to Figure 26-7.In the figure above,suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?

The argument advanced by Milton Friedman for adopting a monetary growth rule is that

When housing prices ________,as they did beginning in 2006 following the housing market bubble,consumption spending on furniture,appliances,and home improvements declined as many households found it ________ to borrow against the value of their homes.

By the height of the housing bubble in 2005 and early 2006,lenders had greatly loosened the standards for obtaining a mortgage loan,with many mortgages being granted to sub-prime borrowers ________ and "Alt-A" borrowers ________.

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

If the Fed raises the interest rate,this will inflation and real GDP in the short run.

When the price of a financial asset its interest rate will .

When housing prices ,as they did beginning in 2006 following the housing market bubble,consumption spending on furniture,appliances,and home improvements declined as many households found it to borrow against the value of their homes.

By the height of the housing bubble in 2005 and early 2006,lenders had greatly loosened the standards for obtaining a mortgage loan,with many mortgages being granted to sub-prime borrowers and "Alt-A" borrowers .