Question 1

How many times is GDP for a particular quarter estimated?

Accepted Answer

A) once 
B) twice 
C) three times 
D) more than three times 
A) once 
B) twice 
C) three times 
D) more than three times

Question 2

An increase in the money supply will cause

Accepted Answer

A) the IS curve to shift down and to the right. 
B) the IS curve to shift up and to the left. 
C) the LM curve to shift down and to the right. 
D) the LM curve to shift up and to the left. 
A) the IS curve to shift down and to the right. 
B) the IS curve to shift up and to the left. 
C) the LM curve to shift down and to the right. 
D) the LM curve to shift up and to the left.

Question 3

In a closed economy, if the goods market is in equilibrium, national saving is $2 trillion, national consumption is $7 trillion, and government purchases are $2.5 trillion, then GDP equals

Accepted Answer

A) $7 trillion. 
B) $9.5 trillion. 
C) $11.5 trillion. 
D) Not enough information has been provided to determine the answer. 
A) $7 trillion. 
B) $9.5 trillion. 
C) $11.5 trillion. 
D) Not enough information has been provided to determine the answer.

Question 4

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

Accepted Answer

A) since real rates are what affects borrowing and spending decisions. 
B) by improving borrower and bank balance sheets. 
C) by reducing transactions costs. 
D) only when the policy is substantial. 
A) since real rates are what affects borrowing and spending decisions. 
B) by improving borrower and bank balance sheets. 
C) by reducing transactions costs. 
D) only when the policy is substantial.

Question 5

What effect would economic weakness in Europe due to a sovereign debt crisis have on the U.S. economy?

Accepted Answer

A) IS shifts to the right 
B) IS shifts to the left 
C) potential GDP increases 
D) potential GDP decreases 
A) IS shifts to the right 
B) IS shifts to the left 
C) potential GDP increases 
D) potential GDP decreases

Question 6

What limited the effectiveness of monetary policy during the Financial Crisis of 2007-2009?

Accepted Answer

During the financial crisis, the default

Question 7

When the Fed reduces the real interest rate, which of the following does NOT increase?

Accepted Answer

A) consumption 
B) investment 
C) government purchases 
D) net exports 
A) consumption 
B) investment 
C) government purchases 
D) net exports

Question 8

Which of the following is NOT true of the interest rate channel?

Accepted Answer

A) Bank loans play no special role. 
B) The Fed changes the real interest rate which affects the components of aggregate expenditures. 
C) Borrowers are indifferent as to how and from whom they raise funds. 
D) Alternative sources of funds are not substitutes for each other. 
A) Bank loans play no special role. 
B) The Fed changes the real interest rate which affects the components of aggregate expenditures. 
C) Borrowers are indifferent as to how and from whom they raise funds. 
D) Alternative sources of funds are not substitutes for each other.

Question 9

Lower interest rates which reduce the debt-servicing burden of households, thus increasing their net worth, is best described by the

Accepted Answer

A) bank lending channel. 
B) money channel. 
C) financial market channel. 
D) balance sheet channel. 
A) bank lending channel. 
B) money channel. 
C) financial market channel. 
D) balance sheet channel.

Question 10

The balance sheet channel describes ways in which interest rate changes resulting from monetary policy affect

Accepted Answer

A) the portfolio decisions of households. 
B) the portfolio decisions of businesses. 
C) borrowers' net worth. 
D) lenders' net worth. 
A) the portfolio decisions of households. 
B) the portfolio decisions of businesses. 
C) borrowers' net worth. 
D) lenders' net worth.

Question 11

Which of the following would NOT cause the IS curve to shift to the left?

Accepted Answer

A) a decrease in government purchases 
B) an increase in consumer confidence 
C) a decrease in foreign demand for domestic products 
D) a decrease in the expected future profitability of capital 
A) a decrease in government purchases 
B) an increase in consumer confidence 
C) a decrease in foreign demand for domestic products 
D) a decrease in the expected future profitability of capital

Question 12

The level of potential GDP

Accepted Answer

A) increases as the real rate of interest decreases. 
B) increases as the real rate of interest increases. 
C) is unaffected by the real rate of interest. 
D) is represented on the IS-MP model by a horizontal line at the world real rate of interest. 
A) increases as the real rate of interest decreases. 
B) increases as the real rate of interest increases. 
C) is unaffected by the real rate of interest. 
D) is represented on the IS-MP model by a horizontal line at the world real rate of interest.

Question 13

All of the following tends to occur when unemployment is above the natural rate EXCEPT:

Accepted Answer

A) wage increases will be limited 
B) inflation will rise 
C) increases in the cost of production will be limited 
D) there is slack in the labor market 
A) wage increases will be limited 
B) inflation will rise 
C) increases in the cost of production will be limited 
D) there is slack in the labor market

Question 14

A decline 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 15

In a closed economy, national saving equals

Accepted Answer

A) C + I + G. 
B) Y - C - G. 
C) Y - C - I. 
D) Y - G - I. 
A) C + I + G. 
B) Y - C - G. 
C) Y - C - I. 
D) Y - G - I.

Question 16

Which of the following is NOT a reason given by economists for the failure of Okun's law to account for the rise in unemployment during the recession of 2007-2009?

Accepted Answer

A) increased willingness among firms to lay off workers during recessions 
B) a surge in productivity during the recession 
C) the unusual severity of the recession 
D) it does not take into account the effect of the stimulus 
A) increased willingness among firms to lay off workers during recessions 
B) a surge in productivity during the recession 
C) the unusual severity of the recession 
D) it does not take into account the effect of the stimulus

Question 17

In a closed economy, the total quantity of goods demanded equals the sum of

Accepted Answer

A) consumption spending, investment spending, and government spending. 
B) consumption spending, national saving, and taxes. 
C) consumption spending, government spending, and taxes. 
D) investment spending, national saving, and taxes. 
A) consumption spending, investment spending, and government spending. 
B) consumption spending, national saving, and taxes. 
C) consumption spending, government spending, and taxes. 
D) investment spending, national saving, and taxes.

Question 18

If a $10 billion increase in investment leads to a $20 billion increase in GDP, the multiplier is

Accepted Answer

A) 0)5 
B) 2 
C) 10 
D) 30 
A) 0)5 
B) 2 
C) 10 
D) 30

Question 19

Use the following data to calculate equilibrium real GDP: C= .75Y, I = $2 trillion, G=$1 trillion and NX = -$0.5 trillion.

Accepted Answer

Y = 0.75Y + 2 + 1 -

Question 20

In a closed economy, the goods market is in equilibrium when

Accepted Answer

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

How many times is GDP for a particular quarter estimated?

An increase in the money supply will cause

In a closed economy, if the goods market is in equilibrium, national saving is $2 trillion, national consumption is $7 trillion, and government purchases are $2.5 trillion, then GDP equals

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

What effect would economic weakness in Europe due to a sovereign debt crisis have on the U.S. economy?

What limited the effectiveness of monetary policy during the Financial Crisis of 2007-2009?

When the Fed reduces the real interest rate, which of the following does NOT increase?

Which of the following is NOT true of the interest rate channel?

Lower interest rates which reduce the debt-servicing burden of households, thus increasing their net worth, is best described by the

The balance sheet channel describes ways in which interest rate changes resulting from monetary policy affect

Which of the following would NOT cause the IS curve to shift to the left?

The level of potential GDP

All of the following tends to occur when unemployment is above the natural rate EXCEPT:

A decline in the output gap causes the demand for real balances

In a closed economy, national saving equals

Which of the following is NOT a reason given by economists for the failure of Okun's law to account for the rise in unemployment during the recession of 2007-2009?

In a closed economy, the total quantity of goods demanded equals the sum of

If a $10 billion increase in investment leads to a $20 billion increase in GDP, the multiplier is

Use the following data to calculate equilibrium real GDP: C= .75Y, I = $2 trillion, G=$1 trillion and NX = -$0.5 trillion.

In a closed economy, the goods market is in equilibrium when

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

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

How many times is GDP for a particular quarter estimated?

An increase in the money supply will cause

In a closed economy, if the goods market is in equilibrium, national saving is $2 trillion, national consumption is $7 trillion, and government purchases are $2.5 trillion, then GDP equals

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

What effect would economic weakness in Europe due to a sovereign debt crisis have on the U.S. economy?

What limited the effectiveness of monetary policy during the Financial Crisis of 2007-2009?

When the Fed reduces the real interest rate, which of the following does NOT increase?

Which of the following is NOT true of the interest rate channel?

Lower interest rates which reduce the debt-servicing burden of households, thus increasing their net worth, is best described by the

The balance sheet channel describes ways in which interest rate changes resulting from monetary policy affect

Which of the following would NOT cause the IS curve to shift to the left?

The level of potential GDP

All of the following tends to occur when unemployment is above the natural rate EXCEPT:

A decline in the output gap causes the demand for real balances

In a closed economy, national saving equals

Which of the following is NOT a reason given by economists for the failure of Okun's law to account for the rise in unemployment during the recession of 2007-2009?

In a closed economy, the total quantity of goods demanded equals the sum of

If a $10 billion increase in investment leads to a $20 billion increase in GDP, the multiplier is

Use the following data to calculate equilibrium real GDP: C= .75Y, I = $2 trillion, G=$1 trillion and NX = -$0.5 trillion.

In a closed economy, the goods market is in equilibrium when

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