Question 1

When the transmission mechanism breaks down macroeconomists call this the

Accepted Answer

A) liquidity trap. 
B) crowding out. 
C) crowding in. 
D) debt ceiling. 
A) liquidity trap. 
B) crowding out. 
C) crowding in. 
D) debt ceiling.

Question 2

An increase in the discount 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 3

If the reserve ratio is .20, the money multiplier can be as high as

Accepted Answer

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

Question 4

The property of money that allows us to avoid finding a trading partner for all of our goods (bartering)is called the

Accepted Answer

A) medium of exchange. 
B) store of value. 
C) creation of value. 
D) security of value. 
A) medium of exchange. 
B) store of value. 
C) creation of value. 
D) security of value.

Question 5

Money is useful because it serves as a

Accepted Answer

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

Question 6

The "monetary policy transmission mechanism" connects

Accepted Answer

A) individual income tax rates to aggregate demand. 
B) individual income tax rates to aggregate supply. 
C) short-term interest rates to aggregate demand. 
D) open market purchases to the Fed's balance sheet. 
A) individual income tax rates to aggregate demand. 
B) individual income tax rates to aggregate supply. 
C) short-term interest rates to aggregate demand. 
D) open market purchases to the Fed's balance sheet.

Question 7

The traditional tools of monetary policy

Accepted Answer

A) seek to influence an "intermediate" target variable. 
B) directly impact the economy. 
C) can only be utilized after obtaining the approval of Congress. 
D) rely heavily upon changes in individual income tax rates. 
A) seek to influence an "intermediate" target variable. 
B) directly impact the economy. 
C) can only be utilized after obtaining the approval of Congress. 
D) rely heavily upon changes in individual income tax rates.

Question 8

A purchase of government debt as part of open market operations 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 9

The amount of money that a bank must keep on reserve at the Federal Reserve the

Accepted Answer

A) reserve amount. 
B) reserve ratio. 
C) portfolio portion. 
D) cash reserve portion. 
A) reserve amount. 
B) reserve ratio. 
C) portfolio portion. 
D) cash reserve portion.

Question 10

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

Accepted Answer

A) raise the primary credit rate. 
B) lower the federal funds rate target. 
C) raise the reserve ratio. 
D) sell government debt. 
A) raise the primary credit rate. 
B) lower the federal funds rate target. 
C) raise the reserve ratio. 
D) sell government debt.

Question 11

If the reserve ratio is .10, the money multiplier can be as high as

Accepted Answer

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

Question 12

The Federal Reserve's long standing tools includes

Accepted Answer

A) tax rate changes. 
B) government spending policies. 
C) changing the level of the targeted interest rate. 
D) labor regulations. 
A) tax rate changes. 
B) government spending policies. 
C) changing the level of the targeted interest rate. 
D) labor regulations.

Question 13

The transmission mechanism in monetary policy is the

Accepted Answer

A) decision making process. 
B) name given to describe the easing of monetary policy. 
C) manner in which a buying or selling of bonds ultimately impacts important macroeconomic variables such as real GDP. 
D) name given to describe the tightening of monetary policy. 
A) decision making process. 
B) name given to describe the easing of monetary policy. 
C) manner in which a buying or selling of bonds ultimately impacts important macroeconomic variables such as real GDP. 
D) name given to describe the tightening of monetary policy.

Question 14

A sale of government debt as part of open market operations 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

From the early 1980's through 2000 the Federal Reserve's primary focus was on

Accepted Answer

A) ensuring rapid growth. 
B) controlled inflation and stable growth. 
C) stable employment through monetary expansion. 
D) keeping gold prices stable. 
A) ensuring rapid growth. 
B) controlled inflation and stable growth. 
C) stable employment through monetary expansion. 
D) keeping gold prices stable.

Question 16

The Federal Funds rate is

Accepted Answer

A) directly determined 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) directly determined 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 17

When the Federal Reserve wishes to, in the long run, decrease inflation 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 18

To signal its intention to restrict credit availability, the Federal Reserve could

Accepted Answer

A) increases the discount rate. 
B) pushes the discount rate below the Federal Funds rate. 
C) keeps the discount rate equal to the Federal Funds rate. 
D) reduces the discount rate by ¼ of a percentage point. 
A) increases the discount rate. 
B) pushes the discount rate below the Federal Funds rate. 
C) keeps the discount rate equal to the Federal Funds rate. 
D) reduces the discount rate by ¼ of a percentage point.

Question 19

An increase in 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 20

The fact that you can use money to buy things well after the money is earned is a result of which characteristic?

Accepted Answer

A) Its use as a medium of exchange. 
B) The fact that it is a store of value. 
C) The fact that it is a measure of value. 
D) The fact that it is backed by gold. 
A) Its use as a medium of exchange. 
B) The fact that it is a store of value. 
C) The fact that it is a measure of value. 
D) The fact that it is backed by gold.

Exam 10: Monetary Policy

When the transmission mechanism breaks down macroeconomists call this the

An increase in the discount rate would be an example of

If the reserve ratio is .20, the money multiplier can be as high as

The property of money that allows us to avoid finding a trading partner for all of our goods (bartering)is called the

Money is useful because it serves as a

The "monetary policy transmission mechanism" connects

The traditional tools of monetary policy

A purchase of government debt as part of open market operations would be an example of

The amount of money that a bank must keep on reserve at the Federal Reserve the

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

If the reserve ratio is .10, the money multiplier can be as high as

The Federal Reserve's long standing tools includes

The transmission mechanism in monetary policy is the

A sale of government debt as part of open market operations would be an example of

From the early 1980's through 2000 the Federal Reserve's primary focus was on

The Federal Funds rate is

When the Federal Reserve wishes to, in the long run, decrease inflation it

To signal its intention to restrict credit availability, the Federal Reserve could

An increase in the reserve ratio would be an example of

The fact that you can use money to buy things well after the money is earned is a result of which characteristic?

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Perfect Competition, Monopoly, and Economic Versus Normal Profit

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

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Aggregate Demand and Aggregate Supply

Fiscal Policy

Federal Spending

Federal Deficits, Surpluses, and the National Debt

The Housing Bubble

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Is Economic Stagnation the New Normal

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International Finance and Exchange Rates

The European Debt Crisis

Economic Growth and Development

Nafta, Gatt, Wto: Are Trade Agreements Good for Us

The Line Between Legal and Illegal Goods

Natural Resources, the Environment, and Climate Change

Health Care

Government-Provided Health Insurance: Medicaid, Medicare, and the Child Health Insurance Program

The Economics of Prescription Drugs

So You Want to Be a Lawyer: Economics and the Law

The Economics of Crime

Antitrust

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Income and Wealth Inequality

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Minimum Wage

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Rent Control

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Head Start

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Personal Income Taxes

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