Question 1

One result of a contractionary monetary policy would be

Accepted Answer

A) a decline in the price level. 
B) an increase in the money supply. 
C) an increase in business investment. 
D) lower interest rates. 
A) a decline in the price level. 
B) an increase in the money supply. 
C) an increase in business investment. 
D) lower interest rates.

Question 2

Which of the following policy tools is directly controlled by the Trading Desk at the Federal Reserve Bank of New York?

Accepted Answer

A) the spread between the discount rate and the federal funds rate 
B) the spread between the federal funds rate and the interest rate on banks' required reserves 
C) the required reserve ratio 
D) open market sales and purchases 
A) the spread between the discount rate and the federal funds rate 
B) the spread between the federal funds rate and the interest rate on banks' required reserves 
C) the required reserve ratio 
D) open market sales and purchases

Question 3

Which of the following will tend to occur when the interest rate increases?

Accepted Answer

A) The demand for money curve shifts leftward. 
B) The demand for money curve shifts rightward. 
C) There is a rightward movement along the demand for money curve. 
D) There is a leftward movement along the demand for money curve. 
A) The demand for money curve shifts leftward. 
B) The demand for money curve shifts rightward. 
C) There is a rightward movement along the demand for money curve. 
D) There is a leftward movement along the demand for money curve.

Question 4

The opportunity cost of holding excess reserves is equal to

Accepted Answer

A) the discount rate. 
B) the federal funds rate. 
C) the federal funds rate minus the discount rate. 
D) none of the above. 
A) the discount rate. 
B) the federal funds rate. 
C) the federal funds rate minus the discount rate. 
D) none of the above.

Question 5

In the interest-rate-based transmission mechanism, a decrease in the money supply will

Accepted Answer

A) increase the price level. 
B) reduce the rate of interest and the level of investment. 
C) reduce investment, shift the aggregate demand function inward, and lower real Gross Domestic Product (GDP). 
D) shift the aggregate supply function inward and increase real Gross Domestic Product (GDP). 
A) increase the price level. 
B) reduce the rate of interest and the level of investment. 
C) reduce investment, shift the aggregate demand function inward, and lower real Gross Domestic Product (GDP). 
D) shift the aggregate supply function inward and increase real Gross Domestic Product (GDP).

Question 6

Which of the following is NOT a reason the Fed changes the rate of growth of the money supply?

Accepted Answer

A) to influence aggregate demand 
B) to shift the demand for money curve 
C) to influence the amount of consumption 
D) to influence the amount of investment 
A) to influence aggregate demand 
B) to shift the demand for money curve 
C) to influence the amount of consumption 
D) to influence the amount of investment

Question 7

Changes in which of the following will cause changes in the equilibrium federal funds rate?

Accepted Answer

A) the demand for excess reserves by banks 
B) the demand for required reserves by banks 
C) the supply of reserves created through past open market operations 
D) all of the above 
A) the demand for excess reserves by banks 
B) the demand for required reserves by banks 
C) the supply of reserves created through past open market operations 
D) all of the above

Question 8

Why is it more difficult for the Fed to control the money supply today than it was fifty years ago?

Accepted Answer

The international financial markets are

Question 9

Suppose the actual equilibrium federal funds rate is above 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

The net-export effect of expansionary monetary policy is a(n)

Accepted Answer

A) depreciation of the value of the dollar and the increase of U.S. net exports. 
B) depreciation of the value of the dollar and the decrease of U.S. net exports. 
C) appreciation of the value of the dollar and the increase of U.S. net exports. 
D) appreciation of the value of the dollar and the decrease of U.S. net exports. 
A) depreciation of the value of the dollar and the increase of U.S. net exports. 
B) depreciation of the value of the dollar and the decrease of U.S. net exports. 
C) appreciation of the value of the dollar and the increase of U.S. net exports. 
D) appreciation of the value of the dollar and the decrease of U.S. net exports.

Question 11

The equation of exchange is an ________ while the quantity theory of money is a theory that ________.

Accepted Answer

A) accounting identity; assumes the money supply is constant 
B) accounting identity; assumes velocity is held constant 
C) accounting theory; assumes the price level is constant 
D) accounting theory; economists use to explain changes in real GDP 
A) accounting identity; assumes the money supply is constant 
B) accounting identity; assumes velocity is held constant 
C) accounting theory; assumes the price level is constant 
D) accounting theory; economists use to explain changes in real GDP

Question 12

As nominal Gross Domestic Product (GDP)rises, the transactions demand for money

Accepted Answer

A) increases, and the money demand curve shifts to the left. 
B) decreases, and the money demand curve shifts to the left. 
C) increases, and the money demand curve shifts to the right. 
D) remains constant, and the money demand curve remains the same. 
A) increases, and the money demand curve shifts to the left. 
B) decreases, and the money demand curve shifts to the left. 
C) increases, and the money demand curve shifts to the right. 
D) remains constant, and the money demand curve remains the same.

Question 13

According to the quantity theory of money

Accepted Answer

A) real Gross Domestic Product (GDP)is directly related to changes in the money supply in the long run. 
B) velocity varies indirectly with the rate of growth of the money supply. 
C) a proportionate increase in the money supply leads to a less than proportionate increase in real Gross Domestic Product (GDP), at least in the long run. 
D) a given proportionate increase in the money supply leads to an equal proportionate increase in the price level. 
A) real Gross Domestic Product (GDP)is directly related to changes in the money supply in the long run. 
B) velocity varies indirectly with the rate of growth of the money supply. 
C) a proportionate increase in the money supply leads to a less than proportionate increase in real Gross Domestic Product (GDP), at least in the long run. 
D) a given proportionate increase in the money supply leads to an equal proportionate increase in the price level.

Question 14

The official Federal Reserve strategy for implementing its monetary policy objectives is spelled out in the

Accepted Answer

A) Federal Reserve Board (FR
B) Decree. 
B) Federal Reserve Bank Cooperative (FRB
C) Proposal. 
C) Federal Advisory Committee (FA
C) Statement. 
D) Federal Open Market Committee (FOM
C) Directive. 
A) Federal Reserve Board (FR
B) Decree. 
B) Federal Reserve Bank Cooperative (FRB
C) Proposal. 
C) Federal Advisory Committee (FA
C) Statement. 
D) Federal Open Market Committee (FOM
C) Directive.

Question 15

Using the interest rate as a measure of the opportunity cost of holding money, the demand for money curve

Accepted Answer

A) slopes upward with respect to the rate of interest. 
B) is not affected by the price level. 
C) slopes downward with respect to the rate of interest. 
D) is vertical. 
A) slopes upward with respect to the rate of interest. 
B) is not affected by the price level. 
C) slopes downward with respect to the rate of interest. 
D) is vertical.

Question 16

The quantity theory of money is based on the formula that

Accepted Answer

A) V = P*Y*Ms. 
B) Y = P*V/Ms. 
C) Ms= P*V/Y. 
D) P = Ms*V/Y. 
A) V = P*Y*Ms. 
B) Y = P*V/Ms. 
C) Ms= P*V/Y. 
D) P = Ms*V/Y.

Question 17

When the Fed conducts open market operations, it

Accepted Answer

A) purchases or sells government bonds issued by the U.S. Treasury. 
B) is engaging in fiscal policy. 
C) also raises taxes at the same time. 
D) shifts the demand for money curve. 
A) purchases or sells government bonds issued by the U.S. Treasury. 
B) is engaging in fiscal policy. 
C) also raises taxes at the same time. 
D) shifts the demand for money curve.

Question 18

-In the above figure, if we begin at S₂ and the Fed buys bonds

Accepted Answer

A) the price of bonds falls, and the interest rate rises. 
B) the price of bonds falls, and so does the interest rate. 
C) the price of bonds rises, and so does the interest rate. 
D) the price of bonds rises, and the interest rate falls. 
A) the price of bonds falls, and the interest rate rises. 
B) the price of bonds falls, and so does the interest rate. 
C) the price of bonds rises, and so does the interest rate. 
D) the price of bonds rises, and the interest rate falls.

Question 19

A bond that pays a yearly interest rate of $100 is for sale. The interest rate was 10 percent and now is 5 percent. The price of the bond has

Accepted Answer

A) decreased from $1000 to $500. 
B) increased from $1000 to $2000. 
C) increased from $500 to $2000. 
D) decreased from $2000 to $1000. 
A) decreased from $1000 to $500. 
B) increased from $1000 to $2000. 
C) increased from $500 to $2000. 
D) decreased from $2000 to $1000.

Question 20

The demand for money curve is drawn with

Accepted Answer

A) the interest rate on the vertical axis and the curve sloping down. 
B) the interest rate on the vertical axis and the curve sloping up. 
C) nominal Gross Domestic Product (GDP)on the vertical axis and the curve sloping up. 
D) nominal Gross Domestic Product (GDP)on the horizontal axis and the curve sloping down. 
A) the interest rate on the vertical axis and the curve sloping down. 
B) the interest rate on the vertical axis and the curve sloping up. 
C) nominal Gross Domestic Product (GDP)on the vertical axis and the curve sloping up. 
D) nominal Gross Domestic Product (GDP)on the horizontal axis and the curve sloping down.

One result of a contractionary monetary policy would be

Which of the following policy tools is directly controlled by the Trading Desk at the Federal Reserve Bank of New York?

Which of the following will tend to occur when the interest rate increases?

The opportunity cost of holding excess reserves is equal to

In the interest-rate-based transmission mechanism, a decrease in the money supply will

Which of the following is NOT a reason the Fed changes the rate of growth of the money supply?

Changes in which of the following will cause changes in the equilibrium federal funds rate?

Why is it more difficult for the Fed to control the money supply today than it was fifty years ago?

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

The net-export effect of expansionary monetary policy is a(n)

The equation of exchange is an while the quantity theory of money is a theory that .

As nominal Gross Domestic Product (GDP)rises, the transactions demand for money

According to the quantity theory of money

The official Federal Reserve strategy for implementing its monetary policy objectives is spelled out in the

Using the interest rate as a measure of the opportunity cost of holding money, the demand for money curve

The quantity theory of money is based on the formula that

When the Fed conducts open market operations, it

-In the above figure, if we begin at S₂ and the Fed buys bonds

A bond that pays a yearly interest rate of $100 is for sale. The interest rate was 10 percent and now is 5 percent. The price of the bond has

The demand for money curve is drawn with

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

Exam 15: Domestic and International Dimensions of Monetary Policy

One result of a contractionary monetary policy would be

Which of the following policy tools is directly controlled by the Trading Desk at the Federal Reserve Bank of New York?

Which of the following will tend to occur when the interest rate increases?

The opportunity cost of holding excess reserves is equal to

In the interest-rate-based transmission mechanism, a decrease in the money supply will

Which of the following is NOT a reason the Fed changes the rate of growth of the money supply?

Changes in which of the following will cause changes in the equilibrium federal funds rate?

Why is it more difficult for the Fed to control the money supply today than it was fifty years ago?

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

The net-export effect of expansionary monetary policy is a(n)

The equation of exchange is an ________ while the quantity theory of money is a theory that ________.

As nominal Gross Domestic Product (GDP)rises, the transactions demand for money

According to the quantity theory of money

The official Federal Reserve strategy for implementing its monetary policy objectives is spelled out in the

Using the interest rate as a measure of the opportunity cost of holding money, the demand for money curve

The quantity theory of money is based on the formula that

When the Fed conducts open market operations, it

-In the above figure, if we begin at S₂ and the Fed buys bonds

A bond that pays a yearly interest rate of $100 is for sale. The interest rate was 10 percent and now is 5 percent. The price of the bond has

The demand for money curve is drawn with

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

The equation of exchange is an while the quantity theory of money is a theory that .