Question 1

Inflation targeting is a framework for carrying out monetary policy whereby

Accepted Answer

A)  the central bank adopts a rigid target for inflation and ignores declines in output. 
B)  the central bank commits to achieving a publicly announced level of inflation. 
C)  the central bank commits to achieving a target level of inflation which is never announced publicly. 
D)  the central bank commits to a monetary growth rule. 
A)  the central bank adopts a rigid target for inflation and ignores declines in output. 
B)  the central bank commits to achieving a publicly announced level of inflation. 
C)  the central bank commits to achieving a target level of inflation which is never announced publicly. 
D)  the central bank commits to a monetary growth rule.

Question 2

Buying a house during a recession may be a good idea if your job is secure because the Federal Reserve often

Accepted Answer

A)  raises interest rates during recessions. 
B)  lowers interest rates during recessions. 
C)  lowers income taxes during recessions. 
D)  sells Treasury bills to help the housing market. 
A)  raises interest rates during recessions. 
B)  lowers interest rates during recessions. 
C)  lowers income taxes during recessions. 
D)  sells Treasury bills to help the housing market.

Question 3

Figure 26-2
  
-Refer to Figure 26-2.In the figure above,a movement from point A to point B would be caused by

Accepted Answer

A)  a decrease in real GDP. 
B)  an increase in the price level. 
C)  a decrease in the price level. 
D)  an increase in the interest rate. 
A)  a decrease in real GDP. 
B)  an increase in the price level. 
C)  a decrease in the price level. 
D)  an increase in the interest rate.

Question 4

If the Fed pursues expansionary monetary policy then

Accepted Answer

A)  the money supply will decrease, interest rates will rise and GDP will fall. 
B)  the money supply will decrease, interest rates will fall and GDP will fall. 
C)  the money supply will increase, interest rates will rise and GDP will rise. 
D)  the money supply will increase, interest rates will fall and GDP will rise. 
A)  the money supply will decrease, interest rates will rise and GDP will fall. 
B)  the money supply will decrease, interest rates will fall and GDP will fall. 
C)  the money supply will increase, interest rates will rise and GDP will rise. 
D)  the money supply will increase, interest rates will fall and GDP will rise.

Question 5

When calculating GDP,the Bureau of Economic Analysis releases its "advanced estimate" of a quarter's GDP approximately

Accepted Answer

A)  three months before the quarter has ended. 
B)  one month after the quarter has ended. 
C)  three months after the quarter has ended. 
D)  one year after the quarter has ended. 
A)  three months before the quarter has ended. 
B)  one month after the quarter has ended. 
C)  three months after the quarter has ended. 
D)  one year after the quarter has ended.

Question 6

Despite saving Lehman Brothers from failing,the Fed and the Treasury decided to allow Bear Stearns to go bankrupt,which it did in September,2008.

Accepted Answer

A) True 
 B)False

Question 7

Rising prices erode the value of money as a ________ and as a ________.

Accepted Answer

A)  unit of barter; unit of account 
B)  store of value; unit of liquidity 
C)  medium of exchange; store of value 
D)  store of value; unit of barter 
A)  unit of barter; unit of account 
B)  store of value; unit of liquidity 
C)  medium of exchange; store of value 
D)  store of value; unit of barter

Question 8

Which of the following are goals of monetary policy?

Accepted Answer

A)  maximizing the value of the dollar relative to other currencies, economic growth, and high employment 
B)  price stability, maximizing the value of the dollar relative to other currencies, and high employment 
C)  price stability, economic growth, and high employment 
D)  price stability, economic growth, and maximizing the value of the dollar relative to other currencies 
A)  maximizing the value of the dollar relative to other currencies, economic growth, and high employment 
B)  price stability, maximizing the value of the dollar relative to other currencies, and high employment 
C)  price stability, economic growth, and high employment 
D)  price stability, economic growth, and maximizing the value of the dollar relative to other currencies

Question 9

Buying a house during a recession may be a good idea if your job seems secure because the Federal Reserve often lowers interest rates during a recession.

Accepted Answer

A) True 
 B)False

Question 10

An increase in real GDP

Accepted Answer

A)  increases the buying and selling of goods and increases the demand for money as a medium of exchange. 
B)  increases the buying and selling of goods and decreases the demand for money as a medium of exchange. 
C)  decreases the buying and selling of goods and increases the demand for money as a medium of exchange. 
D)  decreases the buying and selling of goods and decreases the demand for money as a medium of exchange. 
A)  increases the buying and selling of goods and increases the demand for money as a medium of exchange. 
B)  increases the buying and selling of goods and decreases the demand for money as a medium of exchange. 
C)  decreases the buying and selling of goods and increases the demand for money as a medium of exchange. 
D)  decreases the buying and selling of goods and decreases the demand for money as a medium of exchange.

Question 11

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 12

Table 26-5
  
-Refer to Table 26-5.Suppose the table above illustrates the values of real and potential GDP and the price level,if the Fed does not vote to change their current policy to be more contractionary or expansionary.Suppose that the Fed uses an appropriate policy and is successful in keeping real GDP at potential in 2015.State whether each of the following will be higher or lower than if the Fed had taken no action:
a.Real GDP
b.Potential real GDP
c.The price level
d.The unemployment rate

Accepted Answer

If the Fed's policy was successful,real

Question 13

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

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 14

A financial asset is considered ________ if it can be sold in a secondary market.

Accepted Answer

A)  a commodity 
B)  a security 
C)  a liability 
D)  durable 
A)  a commodity 
B)  a security 
C)  a liability 
D)  durable

Question 15

When the Fed embarked on a policy known as quantitative easing,they

Accepted Answer

A)  slowly lowered the federal funds rate target until it was equal to zero. 
B)  they reduced the required reserve ration by one-quarter point per month for 12 months. 
C)  bought longer-term securities than are usually bought in open market operations. 
D)  opened up lending to primary dealers, commercial banks, and investment banks. 
A)  slowly lowered the federal funds rate target until it was equal to zero. 
B)  they reduced the required reserve ration by one-quarter point per month for 12 months. 
C)  bought longer-term securities than are usually bought in open market operations. 
D)  opened up lending to primary dealers, commercial banks, and investment banks.

Question 16

Figure 26-10
  
-Refer to Figure 26-10.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)  increase the required-reserve ratio 
C)  buy Treasury bills 
D)  sell Treasury bills 
A)  decrease income taxes 
B)  increase the required-reserve ratio 
C)  buy Treasury bills 
D)  sell Treasury bills

Question 17

An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE

Accepted Answer

A)  is a more narrow, focused measure of inflation. 
B)  is a chain-type price index that allows the mix of products to change each year. 
C)  includes the prices of industrial equipment. 
D)  includes the prices of goods, but not services. 
A)  is a more narrow, focused measure of inflation. 
B)  is a chain-type price index that allows the mix of products to change each year. 
C)  includes the prices of industrial equipment. 
D)  includes the prices of goods, but not services.

Question 18

The core personal consumption expenditures price index excludes

Accepted Answer

A)  food and energy prices. 
B)  food and housing prices. 
C)  energy and housing prices. 
D)  housing and health care prices. 
A)  food and energy prices. 
B)  food and housing prices. 
C)  energy and housing prices. 
D)  housing and health care prices.

Question 19

The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing.

Accepted Answer

A) True 
 B)False

Question 20

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.

Inflation targeting is a framework for carrying out monetary policy whereby

Buying a house during a recession may be a good idea if your job is secure because the Federal Reserve often

Figure 26-2 -Refer to Figure 26-2.In the figure above,a movement from point A to point B would be caused by

If the Fed pursues expansionary monetary policy then

When calculating GDP,the Bureau of Economic Analysis releases its "advanced estimate" of a quarter's GDP approximately

Despite saving Lehman Brothers from failing,the Fed and the Treasury decided to allow Bear Stearns to go bankrupt,which it did in September,2008.

Rising prices erode the value of money as a and as a .

Which of the following are goals of monetary policy?

Buying a house during a recession may be a good idea if your job seems secure because the Federal Reserve often lowers interest rates during a recession.

An increase in real GDP

The Fed seeks to promote stability of financial markets because

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

A financial asset is considered ________ if it can be sold in a secondary market.

When the Fed embarked on a policy known as quantitative easing,they

Figure 26-10 -Refer to Figure 26-10.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?

An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE

The core personal consumption expenditures price index excludes

The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing.

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

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

Inflation targeting is a framework for carrying out monetary policy whereby

Buying a house during a recession may be a good idea if your job is secure because the Federal Reserve often

Figure 26-2 -Refer to Figure 26-2.In the figure above,a movement from point A to point B would be caused by

If the Fed pursues expansionary monetary policy then

When calculating GDP,the Bureau of Economic Analysis releases its "advanced estimate" of a quarter's GDP approximately

Despite saving Lehman Brothers from failing,the Fed and the Treasury decided to allow Bear Stearns to go bankrupt,which it did in September,2008.

Rising prices erode the value of money as a ________ and as a ________.

Which of the following are goals of monetary policy?

Buying a house during a recession may be a good idea if your job seems secure because the Federal Reserve often lowers interest rates during a recession.

An increase in real GDP

The Fed seeks to promote stability of financial markets because

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

A financial asset is considered ________ if it can be sold in a secondary market.

When the Fed embarked on a policy known as quantitative easing,they

Figure 26-10 -Refer to Figure 26-10.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?

An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE

The core personal consumption expenditures price index excludes

The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing.

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

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

Rising prices erode the value of money as a and as a .

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