Question 1

The FOMC is the

Accepted Answer

A)  report the Fed gives to Congress twice a year. 
B)  group within the Fed that makes monetary policy. 
C)  report that summarizes the economy across Fed districts. 
D)  name of the meeting the Fed has with Congress twice a year. 
E)  interest rate the Fed most directly influences. 
A)  report the Fed gives to Congress twice a year. 
B)  group within the Fed that makes monetary policy. 
C)  report that summarizes the economy across Fed districts. 
D)  name of the meeting the Fed has with Congress twice a year. 
E)  interest rate the Fed most directly influences.

Question 2

If the Fed buys U.S.government securities,

Accepted Answer

A)  the federal funds rate will fall. 
B)  the federal funds rate will rise. 
C)  the discount rate will fall 
D)  bank reserves will decrease. 
E)  the discount rate will rise. 
A)  the federal funds rate will fall. 
B)  the federal funds rate will rise. 
C)  the discount rate will fall 
D)  bank reserves will decrease. 
E)  the discount rate will rise.

Question 3

The Fed increases the quantity of money to counteract

Accepted Answer

A)  a recessionary gap. 
B)  a federal budget surplus. 
C)  negative net exports. 
D)  an inflationary gap. 
E)  inflation. 
A)  a recessionary gap. 
B)  a federal budget surplus. 
C)  negative net exports. 
D)  an inflationary gap. 
E)  inflation.

Question 4

If the Fed is concerned about a possible recession, it ________ the federal funds rate and, in response, long-term interest rates ________ by a ________ amount than the change in short-term rates.

Accepted Answer

A)  raises; increase; larger 
B)  lowers; increase; smaller 
C)  raises; decrease; larger 
D)  lowers; decrease; smaller 
E)  raises; increase; smaller 
A)  raises; increase; larger 
B)  lowers; increase; smaller 
C)  raises; decrease; larger 
D)  lowers; decrease; smaller 
E)  raises; increase; smaller

Question 5

The steps in the transmission of monetary policy are

Accepted Answer

A)  Congress increases government expenditures on goods and services, leading to an increase in aggregate demand. 
B)  Congress increases the money supply, which lowers the interest rate, and leads to an increase in aggregate demand. 
C)  the Federal Reserve increases government expenditures on goods and services, leading to an increase in aggregate demand. 
D)  the Federal Reserve lowers the federal funds rate, which lowers the real interest rate, and leads to an increase in aggregate demand. 
E)  Congress increases the budget deficit, which increases the money supply, which increases aggregate supply. 
A)  Congress increases government expenditures on goods and services, leading to an increase in aggregate demand. 
B)  Congress increases the money supply, which lowers the interest rate, and leads to an increase in aggregate demand. 
C)  the Federal Reserve increases government expenditures on goods and services, leading to an increase in aggregate demand. 
D)  the Federal Reserve lowers the federal funds rate, which lowers the real interest rate, and leads to an increase in aggregate demand. 
E)  Congress increases the budget deficit, which increases the money supply, which increases aggregate supply.

Question 6

The Fed raises the interest rate when it

Accepted Answer

A)  fears recession. 
B)  wants to increase the quantity of money. 
C)  fears inflation. 
D)  wants to encourage bank lending. 
E)  cannot change the quantity of money. 
A)  fears recession. 
B)  wants to increase the quantity of money. 
C)  fears inflation. 
D)  wants to encourage bank lending. 
E)  cannot change the quantity of money.

Question 7

In an open market purchase, the Fed ________ government securities, which ________ bank reserves and ________ the federal funds rate.

Accepted Answer

A)  buys; increases; raises 
B)  buys; decreases; raises 
C)  sells; increases; lowers 
D)  sells; decreases; lowers 
E)  buys; increases; lowers 
A)  buys; increases; raises 
B)  buys; decreases; raises 
C)  sells; increases; lowers 
D)  sells; decreases; lowers 
E)  buys; increases; lowers

Question 8

When the Fed ________ the federal funds rate, the opportunity cost of firms' investment ________ and so the quantity of investment ________.

Accepted Answer

A)  decreases; rises; decreases 
B)  increases; rises; decreases 
C)  increases; rises; increases 
D)  decreases; falls; decreases 
E)  increases; falls; increases 
A)  decreases; rises; decreases 
B)  increases; rises; decreases 
C)  increases; rises; increases 
D)  decreases; falls; decreases 
E)  increases; falls; increases

The FOMC is the

If the Fed buys U.S.government securities,

The Fed increases the quantity of money to counteract

If the Fed is concerned about a possible recession, it the federal funds rate and, in response, long-term interest rates by a amount than the change in short-term rates.

The steps in the transmission of monetary policy are

The Fed raises the interest rate when it

In an open market purchase, the Fed government securities, which bank reserves and the federal funds rate.

When the Fed the federal funds rate, the opportunity cost of firms' investment and so the quantity of investment .

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

International Trade Policy

International Finance

Filters

Exam 17: Monetary Policy

The FOMC is the

If the Fed buys U.S.government securities,

The Fed increases the quantity of money to counteract

If the Fed is concerned about a possible recession, it ________ the federal funds rate and, in response, long-term interest rates ________ by a ________ amount than the change in short-term rates.

The steps in the transmission of monetary policy are

The Fed raises the interest rate when it

In an open market purchase, the Fed ________ government securities, which ________ bank reserves and ________ the federal funds rate.

When the Fed ________ the federal funds rate, the opportunity cost of firms' investment ________ and so the quantity of investment ________.

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and the Natural Unemployment Rate

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

International Trade Policy

International Finance

Filters

If the Fed is concerned about a possible recession, it the federal funds rate and, in response, long-term interest rates by a amount than the change in short-term rates.

In an open market purchase, the Fed government securities, which bank reserves and the federal funds rate.

When the Fed the federal funds rate, the opportunity cost of firms' investment and so the quantity of investment .