Question 1

Which of the following are goals for monetary policy?

Accepted Answer

A) Controlling world oil prices. 
B) Preventing boom and bust cycles in the economy. 
C) Monitoring corruption in the securities industry. 
D) Controlling rents. 
A) Controlling world oil prices. 
B) Preventing boom and bust cycles in the economy. 
C) Monitoring corruption in the securities industry. 
D) Controlling rents.

Question 2

Money is useful because it serves as a

Accepted Answer

A) medium of exchange. 
B) stimulus to the printing industry. 
C) good memorial to national leaders. 
D) never wears out. 
A) medium of exchange. 
B) stimulus to the printing industry. 
C) good memorial to national leaders. 
D) never wears out.

Question 3

Prior to 2003, the Federal Reserve charged the ______ when loaning money directly to banks, and thereby, to signal its intentions.

Accepted Answer

A) discount rate 
B) real interest rate 
C) exchange rate 
D) primary credit rate 
A) discount rate 
B) real interest rate 
C) exchange rate 
D) primary credit rate

Question 4

The Federal Reserve came into existence in response to

Accepted Answer

A) the inflation of the Civil War. 
B) the depression of the 1930's. 
C) the boom and bust nature of the late 19th and early 20th century. 
D) a fear of a post-World War II depression. 
A) the inflation of the Civil War. 
B) the depression of the 1930's. 
C) the boom and bust nature of the late 19th and early 20th century. 
D) a fear of a post-World War II depression.

Question 5

When the Federal Reserve wishes to, in the long run, increase real GDP it

Accepted Answer

A) will increase the money supply by buying bonds. 
B) will increase the money supply by selling bonds. 
C) will decrease the money supply by selling bonds. 
D) has no policy options that will accomplish this. 
A) will increase the money supply by buying bonds. 
B) will increase the money supply by selling bonds. 
C) will decrease the money supply by selling bonds. 
D) has no policy options that will accomplish this.

Question 6

The Federal Reserve's purchase of AIG stock was

Accepted Answer

A) an example of both the wisdom and problems associated with its political independence. 
B) clearly unconstitutional. 
C) a violation of the separation of powers. 
D) none only after it had Congressional authorization. 
A) an example of both the wisdom and problems associated with its political independence. 
B) clearly unconstitutional. 
C) a violation of the separation of powers. 
D) none only after it had Congressional authorization.

Question 7

M1 includes

Accepted Answer

A) cash held by banks and by the public plus deposits at the Federal Reserve. 
B) currency plus checkable accounts and traveler's checks. 
C) currency plus checkable accounts plus traveler's checks plus small CDs and money market accounts. 
D) just cash held by the public. 
A) cash held by banks and by the public plus deposits at the Federal Reserve. 
B) currency plus checkable accounts and traveler's checks. 
C) currency plus checkable accounts plus traveler's checks plus small CDs and money market accounts. 
D) just cash held by the public.

Question 8

If the reserve ratio is .05, the money multiplier can be as high

Accepted Answer

A) as 50. 
B) as 20. 
C) as 10. 
D) as 5. 
A) as 50. 
B) as 20. 
C) as 10. 
D) as 5.

Question 9

The institution that governs monetary policy is

Accepted Answer

A) the Congress. 
B) the President. 
C) the Treasury Department. 
D) the Federal Reserve. 
A) the Congress. 
B) the President. 
C) the Treasury Department. 
D) the Federal Reserve.

Question 10

The primary credit rate is

Accepted Answer

A) determined directly by the Federal Reserve. 
B) determined by market forces but targeted by the Federal Reserve. 
C) determined by market forces alone without Federal Reserve influence. 
D) determined by Congress. 
A) determined directly by the Federal Reserve. 
B) determined by market forces but targeted by the Federal Reserve. 
C) determined by market forces alone without Federal Reserve influence. 
D) determined by Congress.

Question 11

The target for the Federal Reserve is

Accepted Answer

A) the Federal Funds rate though it has been a monetary aggregate. 
B) and always has been a monetary aggregate. 
C) and always has been the Federal Funds rate. 
D) and always has been inflation. 
A) the Federal Funds rate though it has been a monetary aggregate. 
B) and always has been a monetary aggregate. 
C) and always has been the Federal Funds rate. 
D) and always has been inflation.

Question 12

Which of the following would likely have the greatest effect on the banking system and their ability to loan money?

Accepted Answer

A) A change in the target for the federal funds rate by .25 percentage points. 
B) A change in the discount rate by .25 percentage points. 
C) The purchase of $1,000,000 of federal debt. 
D) A change in the reserve ratio by 5 percentage points. 
A) A change in the target for the federal funds rate by .25 percentage points. 
B) A change in the discount rate by .25 percentage points. 
C) The purchase of $1,000,000 of federal debt. 
D) A change in the reserve ratio by 5 percentage points.

Question 13

An increase in the target for the federal funds rate would be an example of

Accepted Answer

A) expansionary fiscal policy. 
B) expansionary monetary policy. 
C) contractionary fiscal policy. 
D) contractionary monetary policy. 
A) expansionary fiscal policy. 
B) expansionary monetary policy. 
C) contractionary fiscal policy. 
D) contractionary monetary policy.

Question 14

A reduction of the reserve ratio would be an example of

Accepted Answer

A) expansionary fiscal policy. 
B) expansionary monetary policy. 
C) contractionary fiscal policy. 
D) contractionary monetary policy. 
A) expansionary fiscal policy. 
B) expansionary monetary policy. 
C) contractionary fiscal policy. 
D) contractionary monetary policy.

Question 15

If the Federal Reserve has indirect influence of the loanable funds (short term)interest rate, the supply of those loanable funds is likely

Accepted Answer

A) upward sloping. 
B) downward sloping. 
C) flat. 
D) vertical. 
A) upward sloping. 
B) downward sloping. 
C) flat. 
D) vertical.

Question 16

The Federal Reserve's long standing tools include

Accepted Answer

A) open market operations. 
B) changing the level of the targeted interest rate. 
C) changing the reserve ratio. 
D) all of these options are correct. 
A) open market operations. 
B) changing the level of the targeted interest rate. 
C) changing the reserve ratio. 
D) all of these options are correct.

Question 17

The Federal Reserve expanded their traditional tools set in the 2007-2009 recession to include

Accepted Answer

A) tax rate changes. 
B) government spending policies. 
C) labor regulations. 
D) the purchase of corporate paper. 
A) tax rate changes. 
B) government spending policies. 
C) labor regulations. 
D) the purchase of corporate paper.

Question 18

If the Federal Reserve wished to increase interest rates using open market operations it would

Accepted Answer

A) buy US government securities. 
B) sell US government securities. 
C) buy gold. 
D) buy corporate stocks. 
A) buy US government securities. 
B) sell US government securities. 
C) buy gold. 
D) buy corporate stocks.

Question 19

If the Federal Reserve wished to engage in contractionary monetary policy it could

Accepted Answer

A) lower the primary credit rate. 
B) purchase government debt. 
C) lower the reserve ratio. 
D) raise the Federal Funds rate target. 
A) lower the primary credit rate. 
B) purchase government debt. 
C) lower the reserve ratio. 
D) raise the Federal Funds rate target.

Question 20

If money is moved from a consumer checking account into a consumer savings account,

Accepted Answer

A) M1 and M2 both increase. 
B) M1 increases and M2 decreases. 
C) M1 decreases and M2 remains unchanged. 
D) M1 and M2 both remain unchanged. 
A) M1 and M2 both increase. 
B) M1 increases and M2 decreases. 
C) M1 decreases and M2 remains unchanged. 
D) M1 and M2 both remain unchanged.

Exam 10: Monetary Policy

Which of the following are goals for monetary policy?

Money is useful because it serves as a

Prior to 2003, the Federal Reserve charged the ______ when loaning money directly to banks, and thereby, to signal its intentions.

The Federal Reserve came into existence in response to

When the Federal Reserve wishes to, in the long run, increase real GDP it

The Federal Reserve's purchase of AIG stock was

M1 includes

If the reserve ratio is .05, the money multiplier can be as high

The institution that governs monetary policy is

The primary credit rate is

The target for the Federal Reserve is

Which of the following would likely have the greatest effect on the banking system and their ability to loan money?

An increase in the target for the federal funds rate would be an example of

A reduction of the reserve ratio would be an example of

If the Federal Reserve has indirect influence of the loanable funds (short term)interest rate, the supply of those loanable funds is likely

The Federal Reserve's long standing tools include

The Federal Reserve expanded their traditional tools set in the 2007-2009 recession to include

If the Federal Reserve wished to increase interest rates using open market operations it would

If the Federal Reserve wished to engage in contractionary monetary policy it could

If money is moved from a consumer checking account into a consumer savings account,

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Every Macroeconomic Word You Ever Heard: Gross Domestic Product, Inflation, Unemployment, Recession, Depression

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Fiscal Policy

Federal Spending

Federal Deficits, Surpluses, and the National Debt

The Housing Bubble

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Economic Growth and Development

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The Line Between Legal and Illegal Goods

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