Question 1

When all workers who want jobs have them and the demand for and supply of labor are in equilibrium,

Accepted Answer

A) the unemployment rate will be zero. 
B) unemployment is at its natural rate. 
C) the economy will be experiencing high rates of inflation. 
D) frictional unemployment will be zero. 
A) the unemployment rate will be zero. 
B) unemployment is at its natural rate. 
C) the economy will be experiencing high rates of inflation. 
D) frictional unemployment will be zero.

Question 2

Sally Jones lost her job at a steel company because of a permanent decline in the demand for steel. Sally Jones is considered by economists to be

Accepted Answer

A) naturally unemployed. 
B) cyclically unemployed. 
C) structurally unemployed. 
D) frictionally unemployed. 
A) naturally unemployed. 
B) cyclically unemployed. 
C) structurally unemployed. 
D) frictionally unemployed.

Question 3

Temporary, short-term discount loans to banks in areas in which agriculture and tourism are important are known as

Accepted Answer

A) primary credit. 
B) secondary credit. 
C) seasonal credit. 
D) repo loans. 
A) primary credit. 
B) secondary credit. 
C) seasonal credit. 
D) repo loans.

Question 4

Which of the following statements is correct?

Accepted Answer

A) The discount rate is generally above the federal funds rate. 
B) The discount rate is generally below the federal funds rate. 
C) The discount rate is generally equal to the federal funds rate. 
D) There is no general pattern to the relation between the discount rate and the federal funds rate. 
A) The discount rate is generally above the federal funds rate. 
B) The discount rate is generally below the federal funds rate. 
C) The discount rate is generally equal to the federal funds rate. 
D) There is no general pattern to the relation between the discount rate and the federal funds rate.

Question 5

When did the Fed first begin to use open market operations as a policy tool?

Accepted Answer

A) the 1920s 
B) the 1930s 
C) the 1960s 
D) the 1980s 
A) the 1920s 
B) the 1930s 
C) the 1960s 
D) the 1980s

Question 6

According to Taylor's rule, all of the following variables help explain the behavior of the federal funds rate EXCEPT

Accepted Answer

A) output gap. 
B) current inflation. 
C) inflation gap. 
D) yield curve. 
A) output gap. 
B) current inflation. 
C) inflation gap. 
D) yield curve.

Question 7

Reserve requirements are changed

Accepted Answer

A) more frequently than the discount rate is changed, but less frequently than open market operations are conducted. 
B) more frequently than the discount rate is changed and more frequently than open market operations are conducted. 
C) more frequently than open market operations are conducted, but less frequently than the discount rate is changed. 
D) less frequently than open market operations are conducted and less frequently than the discount rate is changed. 
A) more frequently than the discount rate is changed, but less frequently than open market operations are conducted. 
B) more frequently than the discount rate is changed and more frequently than open market operations are conducted. 
C) more frequently than open market operations are conducted, but less frequently than the discount rate is changed. 
D) less frequently than open market operations are conducted and less frequently than the discount rate is changed.

Question 8

If the Fed desired to reduce the federal funds rate,

Accepted Answer

A) it would conduct an open market sale, reducing reserve supply. 
B) it would conduct an open market purchase, increasing reserve supply. 
C) it would conduct an open market sale, increasing reserve demand. 
D) it would conduct an open market purchase, reducing reserve demand. 
A) it would conduct an open market sale, reducing reserve supply. 
B) it would conduct an open market purchase, increasing reserve supply. 
C) it would conduct an open market sale, increasing reserve demand. 
D) it would conduct an open market purchase, reducing reserve demand.

Question 9

Interest rate fluctuations

Accepted Answer

A) are usually not considered to be of much importance and are largely ignored by the Fed. 
B) have the paradoxical effect of increasing the rate of economic growth. 
C) make it difficult for households and firms to plan for the future. 
D) have largely been eliminated by the Fed during the past two decades. 
A) are usually not considered to be of much importance and are largely ignored by the Fed. 
B) have the paradoxical effect of increasing the rate of economic growth. 
C) make it difficult for households and firms to plan for the future. 
D) have largely been eliminated by the Fed during the past two decades.

Question 10

Most macroeconomic policy consists of:

Accepted Answer

A) monetary policy 
B) fiscal policy 
C) exchange-rate policy 
D) regulatory policy 
A) monetary policy 
B) fiscal policy 
C) exchange-rate policy 
D) regulatory policy

Question 11

What is the difference between defensive and dynamic open market operations?

Accepted Answer

Dynamic open market operations are inten

Question 12

What is a matched sale-purchase transaction (also known as a reverse repo)?

Accepted Answer

A matched sale-purchase transa

Question 13

An open market sale

Accepted Answer

A) decreases the price of Treasury securities and also decreases their yield. 
B) increases the price of Treasury securities and decreases their yield. 
C) increases the price of Treasury securities and also increases their yield. 
D) decreases the price of Treasury securities and increases their yield. 
A) decreases the price of Treasury securities and also decreases their yield. 
B) increases the price of Treasury securities and decreases their yield. 
C) increases the price of Treasury securities and also increases their yield. 
D) decreases the price of Treasury securities and increases their yield.

Question 14

John Smith leaves his job in New York to go to California in hopes of finding a better one. If John Smith is unemployed while searching for a job in California, economists would consider him to be

Accepted Answer

A) frictionally unemployed. 
B) structurally unemployed. 
C) cyclically unemployed. 
D) naturally unemployed. 
A) frictionally unemployed. 
B) structurally unemployed. 
C) cyclically unemployed. 
D) naturally unemployed.

Question 15

The benchmark default-free interest rate of the financial system is generally considered to be:

Accepted Answer

A) the federal funds rate 
B) the interest rate on the 10-year Treasury note 
C) the discount rate 
D) the 30-year fixed rate mortgage 
A) the federal funds rate 
B) the interest rate on the 10-year Treasury note 
C) the discount rate 
D) the 30-year fixed rate mortgage

Question 16

In practice, the ECB has committed to what type of strategy for monetary policy?

Accepted Answer

A) inflation targeting 
B) monetary targeting 
C) unclear as to inflation or monetary targeting 
D) exchange rate targeting 
A) inflation targeting 
B) monetary targeting 
C) unclear as to inflation or monetary targeting 
D) exchange rate targeting

Question 17

Increases in interest rates are often blamed on

Accepted Answer

A) Congress. 
B) the President. 
C) the Fed. 
D) the U.S. Treasury. 
A) Congress. 
B) the President. 
C) the Fed. 
D) the U.S. Treasury.

Question 18

How many times has the Fed has changed reserve requirements since 1993?

Accepted Answer

A) never 
B) about once a year 
C) only once 
D) only twice 
A) never 
B) about once a year 
C) only once 
D) only twice

Question 19

How were open market operations conducted prior to 1935?

Accepted Answer

A) They were carried out by the Federal Open Market Committee. 
B) They were carried out under the direction of the Secretary of the Treasury. 
C) They were carried out by the district Federal Reserve banks. 
D) They were carried out by the Banking Committee of the House of Representatives. 
A) They were carried out by the Federal Open Market Committee. 
B) They were carried out under the direction of the Secretary of the Treasury. 
C) They were carried out by the district Federal Reserve banks. 
D) They were carried out by the Banking Committee of the House of Representatives.

Question 20

Which of the following statements is NOT true?

Accepted Answer

A) Each Federal Reserve bank maintains its own discount window. 
B) Before 1980, the Fed rarely made loans to banks which were not members of the Federal Reserve System. 
C) Since 1980, all depository institutions have had access to the discount window. 
D) Each Federal District Bank can charge a different discount rate. 
A) Each Federal Reserve bank maintains its own discount window. 
B) Before 1980, the Fed rarely made loans to banks which were not members of the Federal Reserve System. 
C) Since 1980, all depository institutions have had access to the discount window. 
D) Each Federal District Bank can charge a different discount rate.

When all workers who want jobs have them and the demand for and supply of labor are in equilibrium,

Sally Jones lost her job at a steel company because of a permanent decline in the demand for steel. Sally Jones is considered by economists to be

Temporary, short-term discount loans to banks in areas in which agriculture and tourism are important are known as

Which of the following statements is correct?

When did the Fed first begin to use open market operations as a policy tool?

According to Taylor's rule, all of the following variables help explain the behavior of the federal funds rate EXCEPT

Reserve requirements are changed

If the Fed desired to reduce the federal funds rate,

Interest rate fluctuations

Most macroeconomic policy consists of:

What is the difference between defensive and dynamic open market operations?

What is a matched sale-purchase transaction (also known as a reverse repo)?

An open market sale

John Smith leaves his job in New York to go to California in hopes of finding a better one. If John Smith is unemployed while searching for a job in California, economists would consider him to be

The benchmark default-free interest rate of the financial system is generally considered to be:

In practice, the ECB has committed to what type of strategy for monetary policy?

Increases in interest rates are often blamed on

How many times has the Fed has changed reserve requirements since 1993?

How were open market operations conducted prior to 1935?

Which of the following statements is NOT true?

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

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters

Exam 15: Monetary Policy

When all workers who want jobs have them and the demand for and supply of labor are in equilibrium,

Sally Jones lost her job at a steel company because of a permanent decline in the demand for steel. Sally Jones is considered by economists to be

Temporary, short-term discount loans to banks in areas in which agriculture and tourism are important are known as

Which of the following statements is correct?

When did the Fed first begin to use open market operations as a policy tool?

According to Taylor's rule, all of the following variables help explain the behavior of the federal funds rate EXCEPT

Reserve requirements are changed

If the Fed desired to reduce the federal funds rate,

Interest rate fluctuations

Most macroeconomic policy consists of:

What is the difference between defensive and dynamic open market operations?

What is a matched sale-purchase transaction (also known as a reverse repo)?

An open market sale

John Smith leaves his job in New York to go to California in hopes of finding a better one. If John Smith is unemployed while searching for a job in California, economists would consider him to be

The benchmark default-free interest rate of the financial system is generally considered to be:

In practice, the ECB has committed to what type of strategy for monetary policy?

Increases in interest rates are often blamed on

How many times has the Fed has changed reserve requirements since 1993?

How were open market operations conducted prior to 1935?

Which of the following statements is NOT true?

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

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters