Question 1

Which of the following would cause the money demand curve to shift to the left?

Accepted Answer

A) an open market purchase of Treasury securities by the Federal Reserve 
B) an increase in the interest rate 
C) an increase in the price level 
D) a decrease in real GDP 
A) an open market purchase of Treasury securities by the Federal Reserve 
B) an increase in the interest rate 
C) an increase in the price level 
D) a decrease in real GDP

Question 2

Mortgage lenders often resell mortgages in secondary markets.How might this make lenders act differently than if they intended to hold the mortgages themselves?

Accepted Answer

Lenders would be more likely to grant mo

Question 3

The Fed can attempt to increase the federal funds rate by

Accepted Answer

A) selling Treasury bills,which increases bank reserves. 
B) buying Treasury bills,which increases bank reserves. 
C) selling Treasury bills,which decreases bank reserves. 
D) buying Treasury bills,which decreases bank reserves. 
A) selling Treasury bills,which increases bank reserves. 
B) buying Treasury bills,which increases bank reserves. 
C) selling Treasury bills,which decreases bank reserves. 
D) buying Treasury bills,which decreases bank reserves.

Question 4

Although the Federal Reserve had traditionally made discount loans only to ________,in response to the financial crisis in 2008 the Fed made primary dealers eligible for discount loans as well.

Accepted Answer

A) commercial banks 
B) government agencies 
C) investment banks 
D) mortgage lenders 
A) commercial banks 
B) government agencies 
C) investment banks 
D) mortgage lenders

Question 5

Inflation targeting allows monetary policy to focus on inflation and inflation forecasts except during times of severe recession.

Accepted Answer

A) True 
 B)False

Question 6

Federal Reserve Board Chairmen Paul Volcker,as well as later Fed chairs,focused on which of the following as their main goal of monetary policy?

Accepted Answer

A) high employment 
B) price stability 
C) economic growth 
D) stability of financial markets 
A) high employment 
B) price stability 
C) economic growth 
D) stability of financial markets

Question 7

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.

Question 8

Figure 15-7  
-Refer to Figure 15-7.Suppose the Fed sells Treasury Bills in pursuit of contractionary monetary policy.Using the basic AD-AS model in the figure above,this situation would be depicted as a movement from

Accepted Answer

A) A to B. 
B) B to D. 
C) C to B. 
D) B to C. 
E) C to D. 
A) A to B. 
B) B to D. 
C) C to B. 
D) B to C. 
E) C to D.

Question 9

An increase in the price level causes

Accepted Answer

A) the money demand curve to shift to the left. 
B) the money demand curve to shift to the right. 
C) a movement up along the money demand curve. 
D) a movement down along the money demand curve. 
A) the money demand curve to shift to the left. 
B) the money demand curve to shift to the right. 
C) a movement up along the money demand curve. 
D) a movement down along the money demand curve.

Question 10

Monetarists think that the Fed should use ________ as a target when conducting monetary policy.

Accepted Answer

A) the money supply 
B) the federal funds rate 
C) the Treasury bill rate 
D) the inflation rate 
E) the unemployment rate 
A) the money supply 
B) the federal funds rate 
C) the Treasury bill rate 
D) the inflation rate 
E) the unemployment rate

Question 11

Monetary policy could be procyclical if the Federal Reserve

Accepted Answer

A) is late recognizing that a recession has begun and conducts expansionary monetary policy. 
B) is quick to recognize that a recession has begun and conducts expansionary monetary policy. 
C) is late recognizing that a recession has begun and does not conduct expansionary monetary policy. 
D) is quick to recognize that a recession has begun and does not conduct expansionary monetary policy. 
A) is late recognizing that a recession has begun and conducts expansionary monetary policy. 
B) is quick to recognize that a recession has begun and conducts expansionary monetary policy. 
C) is late recognizing that a recession has begun and does not conduct expansionary monetary policy. 
D) is quick to recognize that a recession has begun and does not conduct expansionary monetary policy.

Question 12

Contractionary monetary policy on the part of the Fed results in

Accepted Answer

A) an increase in the money supply,an increase in interest rates,and an increase in GDP. 
B) a decrease in the money supply,an increase in interest rates,and a decrease in GDP. 
C) an increase in the money supply,a decrease in interest rates,and an increase in GDP. 
D) a decrease in the money supply,a decrease in interest rates,and a decrease in GDP. 
A) an increase in the money supply,an increase in interest rates,and an increase in GDP. 
B) a decrease in the money supply,an increase in interest rates,and a decrease in GDP. 
C) an increase in the money supply,a decrease in interest rates,and an increase in GDP. 
D) a decrease in the money supply,a decrease in interest rates,and a decrease in GDP.

Question 13

The goals of monetary policy tend to be interrelated.For example,when the Fed pursues the goal of ________,it also can achieve the goal of ________ simultaneously.

Accepted Answer

A) high employment; economic growth 
B) high employment; lowering government spending 
C) economic growth; a low current account deficit 
D) stability of financial markets; a low current account deficit 
A) high employment; economic growth 
B) high employment; lowering government spending 
C) economic growth; a low current account deficit 
D) stability of financial markets; a low current account deficit

Question 14

If money demand is extremely sensitive to changes in the interest rate,the money demand curve becomes almost horizontal.If the Fed expands the money supply under these circumstances,then the interest rate will

Accepted Answer

A) fall substantially and investment and consumer spending will fall substantially. 
B) rise substantially and investment and consumer spending will rise substantially. 
C) fall substantially and investment and consumer spending will change very little. 
D) change very little and investment and consumer spending will change very little. 
A) fall substantially and investment and consumer spending will fall substantially. 
B) rise substantially and investment and consumer spending will rise substantially. 
C) fall substantially and investment and consumer spending will change very little. 
D) change very little and investment and consumer spending will change very little.

Question 15

Which of the following are goals of monetary policy?

Accepted Answer

A) maximizing the value of the dollar relative to other currencies,economic growth,and high employment 
B) price stability,maximizing the value of the dollar relative to other currencies,and high employment 
C) price stability,economic growth,and high employment 
D) price stability,economic growth,and maximizing the value of the dollar relative to other currencies 
A) maximizing the value of the dollar relative to other currencies,economic growth,and high employment 
B) price stability,maximizing the value of the dollar relative to other currencies,and high employment 
C) price stability,economic growth,and high employment 
D) price stability,economic growth,and maximizing the value of the dollar relative to other currencies

Question 16

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

Accepted Answer

A) will be greater than 
B) will be less than 
C) will be the same as 
D) may be greater than or less than 
A) will be greater than 
B) will be less than 
C) will be the same as 
D) may be greater than or less than

Question 17

The Taylor rule accurately predicted the changes in the federal funds target during the period

Accepted Answer

A) when Alan Greenspan was the chairman of the Federal Reserve Board. 
B) when Paul Volcker was the chairman of the Federal Reserve Board. 
C) when Arthur Burns was the chairman of the Federal Reserve Board. 
D) when William McChesney Martin was the chairman of the Federal Reserve Board. 
A) when Alan Greenspan was the chairman of the Federal Reserve Board. 
B) when Paul Volcker was the chairman of the Federal Reserve Board. 
C) when Arthur Burns was the chairman of the Federal Reserve Board. 
D) when William McChesney Martin was the chairman of the Federal Reserve Board.

Question 18

Which of the following is true?

Accepted Answer

A) The money market model is essentially a model that determines the short-term nominal rate of interest. 
B) The money market model is essentially a model that determines the short-term real rate of interest. 
C) The loanable funds model is essentially a model that determines the short-term real rate of interest. 
D) The loanable funds model is essentially a model that determines the long-term nominal rate of interest. 
A) The money market model is essentially a model that determines the short-term nominal rate of interest. 
B) The money market model is essentially a model that determines the short-term real rate of interest. 
C) The loanable funds model is essentially a model that determines the short-term real rate of interest. 
D) The loanable funds model is essentially a model that determines the long-term nominal rate of interest.

Question 19

If the Fed's policy is contractionary,it will

Accepted Answer

A) use open market operations to buy Treasury bills. 
B) use open market operations to sell Treasury bills. 
C) lower the discount rate. 
D) lower the reserve requirement. 
A) use open market operations to buy Treasury bills. 
B) use open market operations to sell Treasury bills. 
C) lower the discount rate. 
D) lower the reserve requirement.

Question 20

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.

Which of the following would cause the money demand curve to shift to the left?

Mortgage lenders often resell mortgages in secondary markets.How might this make lenders act differently than if they intended to hold the mortgages themselves?

The Fed can attempt to increase the federal funds rate by

Although the Federal Reserve had traditionally made discount loans only to ________,in response to the financial crisis in 2008 the Fed made primary dealers eligible for discount loans as well.

Inflation targeting allows monetary policy to focus on inflation and inflation forecasts except during times of severe recession.

Federal Reserve Board Chairmen Paul Volcker,as well as later Fed chairs,focused on which of the following as their main goal of monetary policy?

The Fed

Figure 15-7 -Refer to Figure 15-7.Suppose the Fed sells Treasury Bills in pursuit of contractionary monetary policy.Using the basic AD-AS model in the figure above,this situation would be depicted as a movement from

An increase in the price level causes

Monetarists think that the Fed should use ________ as a target when conducting monetary policy.

Monetary policy could be procyclical if the Federal Reserve

Contractionary monetary policy on the part of the Fed results in

The goals of monetary policy tend to be interrelated.For example,when the Fed pursues the goal of ,it also can achieve the goal of simultaneously.

If money demand is extremely sensitive to changes in the interest rate,the money demand curve becomes almost horizontal.If the Fed expands the money supply under these circumstances,then the interest rate will

Which of the following are goals of monetary policy?

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

The Taylor rule accurately predicted the changes in the federal funds target during the period

Which of the following is true?

If the Fed's policy is contractionary,it will

Contractionary monetary policy causes

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

Which of the following would cause the money demand curve to shift to the left?

Mortgage lenders often resell mortgages in secondary markets.How might this make lenders act differently than if they intended to hold the mortgages themselves?

The Fed can attempt to increase the federal funds rate by

Although the Federal Reserve had traditionally made discount loans only to ________,in response to the financial crisis in 2008 the Fed made primary dealers eligible for discount loans as well.

Inflation targeting allows monetary policy to focus on inflation and inflation forecasts except during times of severe recession.

Federal Reserve Board Chairmen Paul Volcker,as well as later Fed chairs,focused on which of the following as their main goal of monetary policy?

The Fed

Figure 15-7 -Refer to Figure 15-7.Suppose the Fed sells Treasury Bills in pursuit of contractionary monetary policy.Using the basic AD-AS model in the figure above,this situation would be depicted as a movement from

An increase in the price level causes

Monetarists think that the Fed should use ________ as a target when conducting monetary policy.

Monetary policy could be procyclical if the Federal Reserve

Contractionary monetary policy on the part of the Fed results in

The goals of monetary policy tend to be interrelated.For example,when the Fed pursues the goal of ________,it also can achieve the goal of ________ simultaneously.

If money demand is extremely sensitive to changes in the interest rate,the money demand curve becomes almost horizontal.If the Fed expands the money supply under these circumstances,then the interest rate will

Which of the following are goals of monetary policy?

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

The Taylor rule accurately predicted the changes in the federal funds target during the period

Which of the following is true?

If the Fed's policy is contractionary,it will

Contractionary monetary policy causes

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 goals of monetary policy tend to be interrelated.For example,when the Fed pursues the goal of ,it also can achieve the goal of simultaneously.