Question 1

Quantitative easing refers to a policy action in which a central bank

Accepted Answer

A) sells government securities to directly decrease bank reserves. 
B) buys government securities to directly increase bank reserves. 
C) increases interest rates directly without altering bank reserves. 
D) decreases interest rates directly without altering bank reserves. 
A) sells government securities to directly decrease bank reserves. 
B) buys government securities to directly increase bank reserves. 
C) increases interest rates directly without altering bank reserves. 
D) decreases interest rates directly without altering bank reserves.

Question 2

Something that affects the amount of money in existence will

Accepted Answer

A) have no particular effect. 
B) not affect the economy as a whole but may affect certain key markets such as the market for loans. 
C) have an effect only if the change in money is large. 
D) affect all markets. 
A) have no particular effect. 
B) not affect the economy as a whole but may affect certain key markets such as the market for loans. 
C) have an effect only if the change in money is large. 
D) affect all markets.

Question 3

Both the precautionary and asset demand for money are influenced by

Accepted Answer

A) the U.S. Treasury. 
B) the interest rate. 
C) gold prices. 
D) none of the above. 
A) the U.S. Treasury. 
B) the interest rate. 
C) gold prices. 
D) none of the above.

Question 4

Assume (other things constant)that the Fed increases the money supply. The mechanism through which aggregate demand increases is, according to interest-rate-based transmission mechanism, summarized as follows:

Accepted Answer

A) the money supply increases → there is a drop in money balances held → interest rates increase → planned investment spending decreases → aggregate demand increases. 
B) increase in money supply → increase in money balances held → decrease in interest rates → decrease in planned investment spending → increase in aggregate demand. 
C) increase in money supply → decrease in money balances held → decrease in interest rates → increase in planned investment spending → increase in aggregate demand. 
D) increase in money supply → decrease in interest rates → increase in planned investment spending → increase in aggregate demand. 
A) the money supply increases → there is a drop in money balances held → interest rates increase → planned investment spending decreases → aggregate demand increases. 
B) increase in money supply → increase in money balances held → decrease in interest rates → decrease in planned investment spending → increase in aggregate demand. 
C) increase in money supply → decrease in money balances held → decrease in interest rates → increase in planned investment spending → increase in aggregate demand. 
D) increase in money supply → decrease in interest rates → increase in planned investment spending → increase in aggregate demand.

Question 5

Asset demand for money is holding money

Accepted Answer

A) to meet unplanned expenditures and emergencies. 
B) as a medium of exchange to make payments. 
C) as a store of value instead of other assets. 
D) to speculate on the stock market and bonds. 
A) to meet unplanned expenditures and emergencies. 
B) as a medium of exchange to make payments. 
C) as a store of value instead of other assets. 
D) to speculate on the stock market and bonds.

Question 6

The precautionary demand for money is when people hold money

Accepted Answer

A) for the interest it yields. 
B) as a store of value. 
C) as a medium of exchange. 
D) to meet unplanned expenditures. 
A) for the interest it yields. 
B) as a store of value. 
C) as a medium of exchange. 
D) to meet unplanned expenditures.

Question 7

Since October 2008, Congress has granted the Fed an authority to

Accepted Answer

A) charge banks interest on both required reserves and excess reserves. 
B) pay banks interest on both required reserves and excess reserves. 
C) charge banks interest on required reserves but pay them interest on excess reserves. 
D) charge banks interest on excess reserves but pay them interest on required reserves. 
A) charge banks interest on both required reserves and excess reserves. 
B) pay banks interest on both required reserves and excess reserves. 
C) charge banks interest on required reserves but pay them interest on excess reserves. 
D) charge banks interest on excess reserves but pay them interest on required reserves.

Question 8

Other things being equal, an increase in the supply of money

Accepted Answer

A) reduces the amount of money balances. 
B) increases the price level. 
C) reduces aggregate demand. 
D) generates significant changes in relative prices. 
A) reduces the amount of money balances. 
B) increases the price level. 
C) reduces aggregate demand. 
D) generates significant changes in relative prices.

Question 9

Suppose the actual equilibrium federal funds rate is below the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

Accepted Answer

A) fiscal policy is contractionary. 
B) fiscal policy is expansionary. 
C) monetary policy is expansionary. 
D) monetary policy is contractionary. 
A) fiscal policy is contractionary. 
B) fiscal policy is expansionary. 
C) monetary policy is expansionary. 
D) monetary policy is contractionary.

Question 10

Suppose the economy currently has some underutilized resources. The Fed engages in expansionary monetary policy. The impact of expansionary monetary policy will be to

Accepted Answer

A) increase aggregate demand, increase prices and increase real GDP. 
B) increase aggregate demand, increase prices and decrease real GDP. 
C) increase short-run aggregate supply, decrease in prices and decrease in real GDP. 
D) increase short-run aggregate supply, decrease prices and increase real GDP. 
A) increase aggregate demand, increase prices and increase real GDP. 
B) increase aggregate demand, increase prices and decrease real GDP. 
C) increase short-run aggregate supply, decrease in prices and decrease in real GDP. 
D) increase short-run aggregate supply, decrease prices and increase real GDP.

Question 11

The Federal Reserve's credit policy refers to

Accepted Answer

A) a direct credit on bank depositors' saving and checking accounts. 
B) regulations on terms on credit cards that banks issue. 
C) the Fed's direct lending to homeowners and students. 
D) the Fed's direct lending to financial and nonfinancial firms. 
A) a direct credit on bank depositors' saving and checking accounts. 
B) regulations on terms on credit cards that banks issue. 
C) the Fed's direct lending to homeowners and students. 
D) the Fed's direct lending to financial and nonfinancial firms.

Question 12

Between 2003 and 2008, the actual federal funds rate

Accepted Answer

A) tended to be lower than the rates predicted by the Taylor rule. 
B) tended to higher than the rates predicted by the Taylor rule. 
C) followed closely the rates predicted by the Taylor rule. 
D) moved in directions opposite to the rates predicted by the Taylor rule. 
A) tended to be lower than the rates predicted by the Taylor rule. 
B) tended to higher than the rates predicted by the Taylor rule. 
C) followed closely the rates predicted by the Taylor rule. 
D) moved in directions opposite to the rates predicted by the Taylor rule.

Question 13

"The demand for money is infinite since everyone wants more money." Do you agree or disagree with this statement?
 Why?

Accepted Answer

Disagree. The demand for money does not

Question 14

When households hold money for unplanned expenditures and emergencies, it is called

Accepted Answer

A) the speculative demand for money. 
B) the transactions demand for money. 
C) the irrational demand for money. 
D) the precautionary demand for money. 
A) the speculative demand for money. 
B) the transactions demand for money. 
C) the irrational demand for money. 
D) the precautionary demand for money.

Question 15

Which of the following will NOT occur in the short run when the money supply decreases?

Accepted Answer

A) People will buy fewer goods and services. 
B) The interest rate will increase. 
C) Aggregate supply decreases. 
D) The price level decreases. 
A) People will buy fewer goods and services. 
B) The interest rate will increase. 
C) Aggregate supply decreases. 
D) The price level decreases.

Question 16

People hold money because it is liquid and lacks risk under the

Accepted Answer

A) money balance demand for money. 
B) asset demand for money. 
C) precautionary demand for money. 
D) transactions demand for money. 
A) money balance demand for money. 
B) asset demand for money. 
C) precautionary demand for money. 
D) transactions demand for money.

Question 17

An indirect effect of monetary policy is that as the money supply

Accepted Answer

A) increases, interest rates fall, and borrowing and spending increase. 
B) increases, interest rates rise, and borrowing and spending decrease. 
C) decreases, interest rates fall, and borrowing and spending increase. 
D) decreases, interest rates rise, and borrowing and spending increase. 
A) increases, interest rates fall, and borrowing and spending increase. 
B) increases, interest rates rise, and borrowing and spending decrease. 
C) decreases, interest rates fall, and borrowing and spending increase. 
D) decreases, interest rates rise, and borrowing and spending increase.

Question 18

The number of times per year that a dollar is spent on final goods and services defines

Accepted Answer

A) the money supply. 
B) the income velocity of money. 
C) the price index. 
D) GDP. 
A) the money supply. 
B) the income velocity of money. 
C) the price index. 
D) GDP.

Question 19

Suppose the actual federal funds rate is below the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

Accepted Answer

A) monetary policy is expansionary. 
B) monetary policy is contractionary. 
C) monetary policy is neither expansionary or contractionary. 
D) fiscal policy is contractionary. 
A) monetary policy is expansionary. 
B) monetary policy is contractionary. 
C) monetary policy is neither expansionary or contractionary. 
D) fiscal policy is contractionary.

Question 20

The precautionary demand for holding money arises because

Accepted Answer

A) people want be able to make unexpected purchases or to meet emergencies. 
B) credit cards charge low interest rates, which makes money more attractive than credit. 
C) people would rather hold money in the form of time deposits than in the form of hard currency. 
D) expected transactions are completed more easily with debit cards than with credit cards. 
A) people want be able to make unexpected purchases or to meet emergencies. 
B) credit cards charge low interest rates, which makes money more attractive than credit. 
C) people would rather hold money in the form of time deposits than in the form of hard currency. 
D) expected transactions are completed more easily with debit cards than with credit cards.

Quantitative easing refers to a policy action in which a central bank

Something that affects the amount of money in existence will

Both the precautionary and asset demand for money are influenced by

Assume (other things constant)that the Fed increases the money supply. The mechanism through which aggregate demand increases is, according to interest-rate-based transmission mechanism, summarized as follows:

Asset demand for money is holding money

The precautionary demand for money is when people hold money

Since October 2008, Congress has granted the Fed an authority to

Other things being equal, an increase in the supply of money

Suppose the actual equilibrium federal funds rate is below the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

Suppose the economy currently has some underutilized resources. The Fed engages in expansionary monetary policy. The impact of expansionary monetary policy will be to

The Federal Reserve's credit policy refers to

Between 2003 and 2008, the actual federal funds rate

"The demand for money is infinite since everyone wants more money." Do you agree or disagree with this statement? Why?

When households hold money for unplanned expenditures and emergencies, it is called

Which of the following will NOT occur in the short run when the money supply decreases?

People hold money because it is liquid and lacks risk under the

An indirect effect of monetary policy is that as the money supply

The number of times per year that a dollar is spent on final goods and services defines

Suppose the actual federal funds rate is below the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

The precautionary demand for holding money arises because

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 15: Domestic and International Dimensions of Monetary Policy

Quantitative easing refers to a policy action in which a central bank

Something that affects the amount of money in existence will

Both the precautionary and asset demand for money are influenced by

Assume (other things constant)that the Fed increases the money supply. The mechanism through which aggregate demand increases is, according to interest-rate-based transmission mechanism, summarized as follows:

Asset demand for money is holding money

The precautionary demand for money is when people hold money

Since October 2008, Congress has granted the Fed an authority to

Other things being equal, an increase in the supply of money

Suppose the actual equilibrium federal funds rate is below the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

Suppose the economy currently has some underutilized resources. The Fed engages in expansionary monetary policy. The impact of expansionary monetary policy will be to

The Federal Reserve's credit policy refers to

Between 2003 and 2008, the actual federal funds rate

"The demand for money is infinite since everyone wants more money." Do you agree or disagree with this statement? Why?

When households hold money for unplanned expenditures and emergencies, it is called

Which of the following will NOT occur in the short run when the money supply decreases?

People hold money because it is liquid and lacks risk under the

An indirect effect of monetary policy is that as the money supply

The number of times per year that a dollar is spent on final goods and services defines

Suppose the actual federal funds rate is below the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

The precautionary demand for holding money arises because

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters