Question 1

A depreciation of the U.S. dollar

Accepted Answer

A)  makes U.S. exports more expensive in terms of foreign currency and imports less expensive in terms of the dollar, increasing net exports. 
B)  makes U.S. exports less expensive in terms of foreign currency and imports more expensive in terms of the dollar, increasing net exports. 
C)  makes U.S. exports less expensive in terms of foreign currency and imports more expensive in terms of the dollar, decreasing net exports. 
D)  makes U.S. exports more expensive in terms of foreign currency and imports less expensive in terms of the dollar, decreasing net exports. 
A)  makes U.S. exports more expensive in terms of foreign currency and imports less expensive in terms of the dollar, increasing net exports. 
B)  makes U.S. exports less expensive in terms of foreign currency and imports more expensive in terms of the dollar, increasing net exports. 
C)  makes U.S. exports less expensive in terms of foreign currency and imports more expensive in terms of the dollar, decreasing net exports. 
D)  makes U.S. exports more expensive in terms of foreign currency and imports less expensive in terms of the dollar, decreasing net exports.

Question 2

When the U.S. dollar appreciates,

Accepted Answer

A)  foreign residents demand more of U.S. goods, and U.S. residents desire to purchase more foreign goods. 
B)  foreign residents demand more of U.S. goods, and U.S. residents desire to purchase fewer foreign goods. 
C)  foreign residents demand fewer of U.S. goods, and U.S. residents desire to purchase more foreign goods. 
D)  foreign residents demand fewer of U.S. goods, and U.S. residents desire to purchase fewer foreign goods. 
A)  foreign residents demand more of U.S. goods, and U.S. residents desire to purchase more foreign goods. 
B)  foreign residents demand more of U.S. goods, and U.S. residents desire to purchase fewer foreign goods. 
C)  foreign residents demand fewer of U.S. goods, and U.S. residents desire to purchase more foreign goods. 
D)  foreign residents demand fewer of U.S. goods, and U.S. residents desire to purchase fewer foreign goods.

Question 3

Which of the following is true of the Fed's credit policy?

Accepted Answer

A)  The Fed has implemented a credit policy since 1914. 
B)  Today about 40 percent of the Fed's asset holdings are related to its conduct of credit policy. 
C)  The Fed's credit policy is extended only to U.S. financial institutions. 
D)  The Fed's objective for its credit policy is to reduce the federal funds rate. 
A)  The Fed has implemented a credit policy since 1914. 
B)  Today about 40 percent of the Fed's asset holdings are related to its conduct of credit policy. 
C)  The Fed's credit policy is extended only to U.S. financial institutions. 
D)  The Fed's objective for its credit policy is to reduce the federal funds rate.

Question 4

An excess quantity of money demanded will lead to a rise in

Accepted Answer

A)  the interest rate. 
B)  investment. 
C)  income. 
D)  bond prices. 
A)  the interest rate. 
B)  investment. 
C)  income. 
D)  bond prices.

Question 5

The Trading Desk's open market operations

Accepted Answer

A)  are confined within a one-hour interval each weekday morning. 
B)  are confined within a six-hour interval each weekday morning. 
C)  occur throughout each day. 
D)  occur once a week. 
A)  are confined within a one-hour interval each weekday morning. 
B)  are confined within a six-hour interval each weekday morning. 
C)  occur throughout each day. 
D)  occur once a week.

Question 6

The quantity theory of money and prices asserts that

Accepted Answer

A)  increases in the money supply lead to inflation. 
B)  increases in the money supply lead to an increase in the velocity of money. 
C)  increases in the money supply lead to a decrease in the velocity of money. 
D)  increases in the money supply will increase real GDP. 
A)  increases in the money supply lead to inflation. 
B)  increases in the money supply lead to an increase in the velocity of money. 
C)  increases in the money supply lead to a decrease in the velocity of money. 
D)  increases in the money supply will increase real GDP.

Question 7

-In the above figure, if the economy is in equilibrium at E1, then

Accepted Answer

A)  the economy is producing below its potential long-run equilibrium at full employment. 
B)  the economy is producing above its potential long-run equilibrium at full employment. 
C)  there is an inflationary gap in the economy. 
D)  the economy is in a period of high inflation. 
A)  the economy is producing below its potential long-run equilibrium at full employment. 
B)  the economy is producing above its potential long-run equilibrium at full employment. 
C)  there is an inflationary gap in the economy. 
D)  the economy is in a period of high inflation.

Question 8

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 9

Suppose the Fed conducts an open market sale of bonds. This monetary policy action will tend to cause

Accepted Answer

A)  the price of bonds to increase and the interest rate to increase. 
B)  the price of bonds to increase and the interest rate to decrease. 
C)  the price of bonds to decrease and the interest rate to increase. 
D)  the price of bonds to decrease and the interest rate to decrease. 
A)  the price of bonds to increase and the interest rate to increase. 
B)  the price of bonds to increase and the interest rate to decrease. 
C)  the price of bonds to decrease and the interest rate to increase. 
D)  the price of bonds to decrease and the interest rate to decrease.

Question 10

According to the equation of exchange, if V = 5, P = 3, and Y = $50, then the money supply equals

Accepted Answer

A)  $10. 
B)  $30. 
C)  $150. 
D)  $300. 
A)  $10. 
B)  $30. 
C)  $150. 
D)  $300.

Question 11

As a result of contractionary monetary policy,

Accepted Answer

A)  interest rates fall, the dollar depreciates, and domestic goods become cheaper, thereby reducing net exports. 
B)  interest rates rise, the dollar appreciates, and domestic goods become more expensive, thereby reducing net exports. 
C)  interest rates rise, the dollar appreciates, and domestic goods become cheaper, thereby reducing net exports. 
D)  interest rates rise, the dollar appreciates, and domestic goods become cheaper, thereby increasing net exports. 
A)  interest rates fall, the dollar depreciates, and domestic goods become cheaper, thereby reducing net exports. 
B)  interest rates rise, the dollar appreciates, and domestic goods become more expensive, thereby reducing net exports. 
C)  interest rates rise, the dollar appreciates, and domestic goods become cheaper, thereby reducing net exports. 
D)  interest rates rise, the dollar appreciates, and domestic goods become cheaper, thereby increasing net exports.

Question 12

The equation of exchange is

Accepted Answer

A)  an assumption that is not always true. 
B)  true in the short run but not always in the long run. 
C)  an accounting identity and therefore is always true. 
D)  a theory developed at the Federal Reserve. 
A)  an assumption that is not always true. 
B)  true in the short run but not always in the long run. 
C)  an accounting identity and therefore is always true. 
D)  a theory developed at the Federal Reserve.

Question 13

Money's use in non-barter transactions relates to its role as a

Accepted Answer

A)  store of value. 
B)  medium of exchange. 
C)  unit of accounting. 
D)  standard of deferred payment. 
A)  store of value. 
B)  medium of exchange. 
C)  unit of accounting. 
D)  standard of deferred payment.

Question 14

Suppose the typical household holds $1,000 when the interest rate is 5 percent. When the interest rate rises to 6 percent, the typical household would most likely hold

Accepted Answer

A)  more money because the opportunity cost of holding money is lower. 
B)  less money because the opportunity cost of holding money is lower. 
C)  more money because the opportunity cost of holding money is higher. 
D)  less money because the opportunity cost of holding money is higher. 
A)  more money because the opportunity cost of holding money is lower. 
B)  less money because the opportunity cost of holding money is lower. 
C)  more money because the opportunity cost of holding money is higher. 
D)  less money because the opportunity cost of holding money is higher.

Question 15

As real GDP increases, people hold

Accepted Answer

A)  less money because they will want to increase the amount of savings. 
B)  less money because they will want to collect interest. 
C)  about the same amount of money since that has been enough in the past. 
D)  more money since they will increase their purchases. 
A)  less money because they will want to increase the amount of savings. 
B)  less money because they will want to collect interest. 
C)  about the same amount of money since that has been enough in the past. 
D)  more money since they will increase their purchases.

Question 16

During a period of contractionary monetary policy,

Accepted Answer

A)  the price level is increased, which leads to an increase in the money supply. 
B)  the price level is decreased ,which leads to a decrease in the money supply. 
C)  the rate of growth of the money supply is increased, leading to an increase in the price level. 
D)  the rate of growth of the money supply is reduced, leading to a decrease in the price level. 
A)  the price level is increased, which leads to an increase in the money supply. 
B)  the price level is decreased ,which leads to a decrease in the money supply. 
C)  the rate of growth of the money supply is increased, leading to an increase in the price level. 
D)  the rate of growth of the money supply is reduced, leading to a decrease in the price level.

Question 17

By saying that the equation of exchange is an accounting identity, we mean that

Accepted Answer

A)  it is useful for accountants, but not for economists. 
B)  it identifies the key national income accounts. 
C)  it is always true. 
D)  it explains the effect of questionable accounting practices on macroeconomic performance. 
A)  it is useful for accountants, but not for economists. 
B)  it identifies the key national income accounts. 
C)  it is always true. 
D)  it explains the effect of questionable accounting practices on macroeconomic performance.

Exam 16: Domestic and International Dimensions of Monetary Policy

A depreciation of the U.S. dollar

When the U.S. dollar appreciates,

Which of the following is true of the Fed's credit policy?

An excess quantity of money demanded will lead to a rise in

The Trading Desk's open market operations

The quantity theory of money and prices asserts that

-In the above figure, if the economy is in equilibrium at E1, then

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

Suppose the Fed conducts an open market sale of bonds. This monetary policy action will tend to cause

According to the equation of exchange, if V = 5, P = 3, and Y = $50, then the money supply equals

As a result of contractionary monetary policy,

The equation of exchange is

Money's use in non-barter transactions relates to its role as a

Suppose the typical household holds $1,000 when the interest rate is 5 percent. When the interest rate rises to 6 percent, the typical household would most likely hold

As real GDP increases, people hold

During a period of contractionary monetary policy,

By saying that the equation of exchange is an accounting identity, we mean that

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-In the above figure, if the economy is in equilibrium at E₁, then