Question 1

If AE > Y, which of the following will NOT occur?

Accepted Answer

A) inventories will decline 
B) actual investment will be more than planned investment 
C) employment will increase 
D) GDP will increase 
A) inventories will decline 
B) actual investment will be more than planned investment 
C) employment will increase 
D) GDP will increase

Question 2

The ways in which monetary policy affect output and prices are known as:

Accepted Answer

A) channels 
B) stations 
C) vehicles 
D) means 
A) channels 
B) stations 
C) vehicles 
D) means

Question 3

Analysts have attempted to model the impact of monetary policy on net worth by emphasizing

Accepted Answer

A) the impact of lower interest rates on business spending on fixed investment. 
B) the impact of lower interest rates on household spending on housing and durable goods. 
C) the liquidity of balance sheet positions as a determinant of business and household spending. 
D) the greater variability of business spending compared to household spending. 
A) the impact of lower interest rates on business spending on fixed investment. 
B) the impact of lower interest rates on household spending on housing and durable goods. 
C) the liquidity of balance sheet positions as a determinant of business and household spending. 
D) the greater variability of business spending compared to household spending.

Question 4

Which of the following is the least likely take place if the Fed responds to a negative demand shock by reducing the real interest rate?

Accepted Answer

A) IS shifts to the right 
B) output gap returns to zero 
C) inflation returns to its previous rate 
D) MP shifts down 
A) IS shifts to the right 
B) output gap returns to zero 
C) inflation returns to its previous rate 
D) MP shifts down

Question 5

Increases in interest rates

Accepted Answer

A) reduce borrowers' net worth. 
B) reduce lenders' net worth. 
C) increase the present value of borrowers' assets. 
D) raise the cost to businesses of internal funding. 
A) reduce borrowers' net worth. 
B) reduce lenders' net worth. 
C) increase the present value of borrowers' assets. 
D) raise the cost to businesses of internal funding.

Question 6

How does the goods market return to equilibrium if AE is less than production?

Accepted Answer

With spending less than production, ther

Question 7

What happened to the risk premium on Baa corporate bonds during the Financial Crisis of 2007-2009?

Accepted Answer

A) it declined slightly 
B) it rose to about 2% 
C) it rose to about 4% 
D) it rose to about 6% 
A) it declined slightly 
B) it rose to about 2% 
C) it rose to about 4% 
D) it rose to about 6%

Question 8

An autonomous expenditure is one that does not depend on:

Accepted Answer

A) government policy 
B) the automobile sector 
C) interest rates 
D) GDP 
A) government policy 
B) the automobile sector 
C) interest rates 
D) GDP

Question 9

For the goods market to be in equilibrium in a closed economy, which of the following must be true?

Accepted Answer

A) Y = S + I + G 
B) S + I = C + G 
C) S + G = Y + C 
D) S = I 
A) Y = S + I + G 
B) S + I = C + G 
C) S + G = Y + C 
D) S = I

Question 10

What is the difference between an autonomous change in spending and an induced change in spending?

Accepted Answer

An autonomous expenditure is e

Question 11

How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?

Accepted Answer

When the current unemployment rate is gr

Question 12

An increase in the expected profitability of investment will cause

Accepted Answer

A) IS to shift right. 
B) IS to shift left. 
C) MP to shift upward. 
D) MP to shift downward. 
A) IS to shift right. 
B) IS to shift left. 
C) MP to shift upward. 
D) MP to shift downward.

Question 13

What unusual measures did the Fed take in trying to reduce long-term interest rates during the Financial Crisis of 2007-2009?

Accepted Answer

A) buying mortgage-backed securities issued by Fannie Mae and Freddie Mac 
B) reducing the federal funds rate multiple times 
C) issuing its own securities 
D) eliminating the discount rate on loans to member banks 
A) buying mortgage-backed securities issued by Fannie Mae and Freddie Mac 
B) reducing the federal funds rate multiple times 
C) issuing its own securities 
D) eliminating the discount rate on loans to member banks

Question 14

Changes in net worth and liquidity may significantly affect the volume of lending and economic activity according to the

Accepted Answer

A) interest rate channel. 
B) balance sheet channel. 
C) money channel. 
D) bank lending channel. 
A) interest rate channel. 
B) balance sheet channel. 
C) money channel. 
D) bank lending channel.

Question 15

What three parts of the economy are represented in the IS-MP model?

Accepted Answer

The IS curve, which represents equilibri

Question 16

The capacity of a firm can best be described as:

Accepted Answer

A) when a firm are producing maximum output 
B) a firm's production when operating normal hours using a normal sized workforce 
C) when a firm makes full use of all the space available in his factory or building 
D) when all of the firm's workers are producing at their maximum potential 
A) when a firm are producing maximum output 
B) a firm's production when operating normal hours using a normal sized workforce 
C) when a firm makes full use of all the space available in his factory or building 
D) when all of the firm's workers are producing at their maximum potential

Question 17

In the IS-MP model, when the Fed increases the real interest rate

Accepted Answer

A) the MP curve shifts up resulting in a decline in the output gap. 
B) the MP curve shifts up resulting in an increase in the output gap. 
C) the MP curve shifts down resulting in a decline in the output gap. 
D) the MP curve shifts down resulting in an increase in the output gap. 
A) the MP curve shifts up resulting in a decline in the output gap. 
B) the MP curve shifts up resulting in an increase in the output gap. 
C) the MP curve shifts down resulting in a decline in the output gap. 
D) the MP curve shifts down resulting in an increase in the output gap.

Question 18

An increase in the output gap causes the demand for real balances

Accepted Answer

A) to rise and the interest rate to fall. 
B) to fall and the interest rate to rise. 
C) and the interest rate to fall. 
D) and the interest rate to rise. 
A) to rise and the interest rate to fall. 
B) to fall and the interest rate to rise. 
C) and the interest rate to fall. 
D) and the interest rate to rise.

Question 19

How does an expansionary monetary policy affect aggregate expenditures according to the bank lending channel?

Accepted Answer

In the bank lending channel, an expansio

Question 20

The LM curve is the combinations of

Accepted Answer

A) the output gap and the real interest rate for which the money market is in equilibrium. 
B) the inflation rate and nominal interest rate for which the money market is in equilibrium. 
C) the inflation rate and real interest rate for which the money market is in equilibrium. 
D) the inflation rate and real interest rate for which the goods market is in equilibrium. 
A) the output gap and the real interest rate for which the money market is in equilibrium. 
B) the inflation rate and nominal interest rate for which the money market is in equilibrium. 
C) the inflation rate and real interest rate for which the money market is in equilibrium. 
D) the inflation rate and real interest rate for which the goods market is in equilibrium.

If AE > Y, which of the following will NOT occur?

The ways in which monetary policy affect output and prices are known as:

Analysts have attempted to model the impact of monetary policy on net worth by emphasizing

Which of the following is the least likely take place if the Fed responds to a negative demand shock by reducing the real interest rate?

Increases in interest rates

How does the goods market return to equilibrium if AE is less than production?

What happened to the risk premium on Baa corporate bonds during the Financial Crisis of 2007-2009?

An autonomous expenditure is one that does not depend on:

For the goods market to be in equilibrium in a closed economy, which of the following must be true?

What is the difference between an autonomous change in spending and an induced change in spending?

How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?

An increase in the expected profitability of investment will cause

What unusual measures did the Fed take in trying to reduce long-term interest rates during the Financial Crisis of 2007-2009?

Changes in net worth and liquidity may significantly affect the volume of lending and economic activity according to the

What three parts of the economy are represented in the IS-MP model?

The capacity of a firm can best be described as:

In the IS-MP model, when the Fed increases the real interest rate

An increase in the output gap causes the demand for real balances

How does an expansionary monetary policy affect aggregate expenditures according to the bank lending channel?

The LM curve is the combinations of

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

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Exam 18: Monetary Theory II: The IS-MP Model

If AE > Y, which of the following will NOT occur?

The ways in which monetary policy affect output and prices are known as:

Analysts have attempted to model the impact of monetary policy on net worth by emphasizing

Which of the following is the least likely take place if the Fed responds to a negative demand shock by reducing the real interest rate?

Increases in interest rates

How does the goods market return to equilibrium if AE is less than production?

What happened to the risk premium on Baa corporate bonds during the Financial Crisis of 2007-2009?

An autonomous expenditure is one that does not depend on:

For the goods market to be in equilibrium in a closed economy, which of the following must be true?

What is the difference between an autonomous change in spending and an induced change in spending?

How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?

An increase in the expected profitability of investment will cause

What unusual measures did the Fed take in trying to reduce long-term interest rates during the Financial Crisis of 2007-2009?

Changes in net worth and liquidity may significantly affect the volume of lending and economic activity according to the

What three parts of the economy are represented in the IS-MP model?

The capacity of a firm can best be described as:

In the IS-MP model, when the Fed increases the real interest rate

An increase in the output gap causes the demand for real balances

How does an expansionary monetary policy affect aggregate expenditures according to the bank lending channel?

The LM curve is the combinations of

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Filters