Question 1

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

Accepted Answer

A)  short-term real interest rates; long-term nominal interest rates 
B)  short-term nominal interest rates; long-term nominal interest rates 
C)  short-term real interest rates; long-term real interest rates 
D)  short-term nominal interest rates; long-term real interest rates 
A)  short-term real interest rates; long-term nominal interest rates 
B)  short-term nominal interest rates; long-term nominal interest rates 
C)  short-term real interest rates; long-term real interest rates 
D)  short-term nominal interest rates; long-term real interest rates

Question 2

Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

Accepted Answer

If the economy is experiencing inflation

Question 3

If the Fed orders an expansionary monetary policy,describe what will happen to the following variables relative to what would have happened without the policy:
a.The money supply
b.Interest rates
c.Investment
d.Consumption
e.Net Exports
f.The aggregate demand curve
g.Real GDP
h.The price level

Accepted Answer

a.The money supply increases
b.Interest

Question 4

Figure 26-1
  
-Refer to Figure 26-1.In the figure above,the money demand curve would move from Money demand₁ to Money demand₂ if

Accepted Answer

A)  real GDP decreased. 
B)  the price level increased. 
C)  the interest rate increased. 
D)  the Federal Reserve sold Treasury securities. 
A)  real GDP decreased. 
B)  the price level increased. 
C)  the interest rate increased. 
D)  the Federal Reserve sold Treasury securities.

Question 5

What problems can high inflation rates cause for the economy?

Accepted Answer

The problems that inflation ca

Question 6

Which of the following is not an argument against inflation targeting?

Accepted Answer

A)  Inflation targeting reduces the flexibility of the Fed to pursue other policy goals. 
B)  Inflation targeting assumes that the Fed can accurately forecast future inflation rates. 
C)  Inflation targeting makes monetary policy ineffective because the targets are publicly announced. 
D)  Inflation targeting holds the Fed accountable for an inflation goal, but may make it less likely the Fed will achieve other goals. 
A)  Inflation targeting reduces the flexibility of the Fed to pursue other policy goals. 
B)  Inflation targeting assumes that the Fed can accurately forecast future inflation rates. 
C)  Inflation targeting makes monetary policy ineffective because the targets are publicly announced. 
D)  Inflation targeting holds the Fed accountable for an inflation goal, but may make it less likely the Fed will achieve other goals.

Question 7

The Federal Reserve did not lower interest rates to help the housing market in 2007 because

Accepted Answer

A)  interest rates were already at historically low levels. 
B)  the unemployment rate was below the natural rate of unemployment. 
C)  banks held excess reserves instead of making loans. 
D)  the inflation rate was at or above the level the Fed considered acceptable. 
A)  interest rates were already at historically low levels. 
B)  the unemployment rate was below the natural rate of unemployment. 
C)  banks held excess reserves instead of making loans. 
D)  the inflation rate was at or above the level the Fed considered acceptable.

Question 8

Why doesn't the Fed have both a money supply target and an interest rate target?

Accepted Answer

A)  Short-term interest rates do not respond to changes in the money supply, which the Fed can control. 
B)  The Fed does not control money demand. 
C)  The Fed cannot offset the impact of changes in cash management by the public or changes in lending policies of commercial banks on the money supply. 
D)  Only the level of interest rates matters when we consider rates of growth in real GDP, employment, and rates of price inflation. 
A)  Short-term interest rates do not respond to changes in the money supply, which the Fed can control. 
B)  The Fed does not control money demand. 
C)  The Fed cannot offset the impact of changes in cash management by the public or changes in lending policies of commercial banks on the money supply. 
D)  Only the level of interest rates matters when we consider rates of growth in real GDP, employment, and rates of price inflation.

Question 9

Table 26-3
  
-Refer to Table 26-3.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 10

Contractionary monetary policy causes

Accepted Answer

A)  aggregate demand to rise and the price level to rise. 
B)  aggregate demand to fall and the price level to fall. 
C)  aggregate demand to rise and the price level to fall. 
D)  aggregate demand to fall and the price level to rise. 
A)  aggregate demand to rise and the price level to rise. 
B)  aggregate demand to fall and the price level to fall. 
C)  aggregate demand to rise and the price level to fall. 
D)  aggregate demand to fall and the price level to rise.

Question 11

Table 26-1
  
-Refer to Table 26-1.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 12

The body that is responsible for dating the beginning and ending dates for a recession is

Accepted Answer

A)  the Fed. 
B)  the Congress. 
C)  the National Bureau of Economic Research. 
D)  the Bureau of Economic Analysis. 
A)  the Fed. 
B)  the Congress. 
C)  the National Bureau of Economic Research. 
D)  the Bureau of Economic Analysis.

Question 13

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 14

Monetary policy refers to the actions the Federal Reserve takes to manage

Accepted Answer

A)  the money supply and income tax rates to pursue its economic objectives. 
B)  the money supply and interest rates to pursue its economic objectives. 
C)  income tax rates and interest rates to pursue its economic objectives. 
D)  government spending and income tax rates to pursue its economic objectives. 
A)  the money supply and income tax rates to pursue its economic objectives. 
B)  the money supply and interest rates to pursue its economic objectives. 
C)  income tax rates and interest rates to pursue its economic objectives. 
D)  government spending and income tax rates to pursue its economic objectives.

Question 15

Suppose the Fed increases the money supply.Which of the following is true?

Accepted Answer

A)  At the original interest rate, the quantity of money demanded is equal to the quantity of money supplied. 
B)  At the original interest rate, the quantity of money demanded is less than the quantity of money supplied. 
C)  At the original interest rate, the quantity of money demanded is greater than the quantity of money supplied. 
D)  The interest rate must rise for the money market to clear. 
A)  At the original interest rate, the quantity of money demanded is equal to the quantity of money supplied. 
B)  At the original interest rate, the quantity of money demanded is less than the quantity of money supplied. 
C)  At the original interest rate, the quantity of money demanded is greater than the quantity of money supplied. 
D)  The interest rate must rise for the money market to clear.

Question 16

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)  includes the prices of more consumer goods and services. 
B)  includes the prices of consumer goods, but not consumer services. 
C)  includes the prices of consumer services, but not consumer goods. 
D)  is a fixed market-basket price index that does not allow the mix of products to change each year. 
A)  includes the prices of more consumer goods and services. 
B)  includes the prices of consumer goods, but not consumer services. 
C)  includes the prices of consumer services, but not consumer goods. 
D)  is a fixed market-basket price index that does not allow the mix of products to change each year.

Question 17

The Fed

Accepted Answer

A)  always engages in countercyclical policy. 
B)  always intends to engage in procyclical policy. 
C)  can engage in procyclical policy if it mistimes its policy response. 
D)  never intends to engage in countercyclical policy. 
A)  always engages in countercyclical policy. 
B)  always intends to engage in procyclical policy. 
C)  can engage in procyclical policy if it mistimes its policy response. 
D)  never intends to engage in countercyclical policy.

The money market model is concerned with and the loanable funds market model is concerned with .

Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

If the Fed orders an expansionary monetary policy,describe what will happen to the following variables relative to what would have happened without the policy: a.The money supply b.Interest rates c.Investment d.Consumption e.Net Exports f.The aggregate demand curve g.Real GDP h.The price level

Figure 26-1 -Refer to Figure 26-1.In the figure above,the money demand curve would move from Money demand₁ to Money demand₂ if

What problems can high inflation rates cause for the economy?

Which of the following is not an argument against inflation targeting?

The Federal Reserve did not lower interest rates to help the housing market in 2007 because

Why doesn't the Fed have both a money supply target and an interest rate target?

Contractionary monetary policy causes

Table 26-1 -Refer to Table 26-1.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

The body that is responsible for dating the beginning and ending dates for a recession is

A monetary policy target is a variable that

Monetary policy refers to the actions the Federal Reserve takes to manage

Suppose the Fed increases the money supply.Which of the following is true?

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 Fed

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

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

If the Fed orders an expansionary monetary policy,describe what will happen to the following variables relative to what would have happened without the policy: a.The money supply b.Interest rates c.Investment d.Consumption e.Net Exports f.The aggregate demand curve g.Real GDP h.The price level

Figure 26-1 -Refer to Figure 26-1.In the figure above,the money demand curve would move from Money demand₁ to Money demand₂ if

What problems can high inflation rates cause for the economy?

Which of the following is not an argument against inflation targeting?

The Federal Reserve did not lower interest rates to help the housing market in 2007 because

Why doesn't the Fed have both a money supply target and an interest rate target?

Contractionary monetary policy causes

Table 26-1 -Refer to Table 26-1.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

The body that is responsible for dating the beginning and ending dates for a recession is

A monetary policy target is a variable that

Monetary policy refers to the actions the Federal Reserve takes to manage

Suppose the Fed increases the money supply.Which of the following is true?

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 Fed

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

The money market model is concerned with and the loanable funds market model is concerned with .