Question 1

One of the portfolio choices people must make is whether to deposit idle funds in a bank or purchase government bonds.

Accepted Answer

A) True 
 B)False  True

Question 2

Figure 14.2   
-Using Figure 14.2,a shift in aggregate demand from AD4 to AD5 will cause,ceteris paribus:

Accepted Answer

A)  An increase in real output and an increase in the price level. 
B)  An increase in real output but no change in the price level. 
C)  An increase in the price level but no change in real output. 
D)  A decrease in the price level but no change in real output. 
A)  An increase in real output and an increase in the price level. 
B)  An increase in real output but no change in the price level. 
C)  An increase in the price level but no change in real output. 
D)  A decrease in the price level but no change in real output. C

Question 3

The buying and selling of government bonds to influence reserves in the banking system is the responsibility of the:

Accepted Answer

A)  Twelve regional Federal Reserve banks. 
B)  Executive Branch of the government. 
C)  Board of Governors of the Federal Reserve. 
D)  Federal Open Market Committee. 
A)  Twelve regional Federal Reserve banks. 
B)  Executive Branch of the government. 
C)  Board of Governors of the Federal Reserve. 
D)  Federal Open Market Committee. D

Question 4

Figure 14.2   
-Using Figure 14.2,a shift in aggregate demand from AD1 to AD2 will cause,ceteris paribus:

Accepted Answer

A)  An increase in real output and an increase in the price level. 
B)  An increase in real output,but no change in the price level. 
C)  An increase in price level,but no change in real output. 
D)  A decrease in the price level,but no change in real output. 
A)  An increase in real output and an increase in the price level. 
B)  An increase in real output,but no change in the price level. 
C)  An increase in price level,but no change in real output. 
D)  A decrease in the price level,but no change in real output.

Question 5

If the Fed wants to increase bank reserves,it can:

Accepted Answer

A)  Raise the discount rate. 
B)  Buy government bonds from the public. 
C)  Increase the minimum reserve ratio. 
D)  Decrease the money multiplier. 
A)  Raise the discount rate. 
B)  Buy government bonds from the public. 
C)  Increase the minimum reserve ratio. 
D)  Decrease the money multiplier.

Question 6

Which of the following will occur if the Fed raises the reserve requirement,ceteris paribus?

Accepted Answer

A)  The aggregate supply curve should shift leftward. 
B)  The aggregate supply curve should shift rightward. 
C)  The aggregate demand curve should shift leftward. 
D)  The aggregate demand curve should shift rightward. 
A)  The aggregate supply curve should shift leftward. 
B)  The aggregate supply curve should shift rightward. 
C)  The aggregate demand curve should shift leftward. 
D)  The aggregate demand curve should shift rightward.

Question 7

According to the Keynesian view of aggregate supply,an increase in the money supply will:

Accepted Answer

A)  Always cause inflation. 
B)  Cause inflation if the economy is at full employment. 
C)  Cause inflation only if aggregate supply is horizontal. 
D)  Never cause inflation. 
A)  Always cause inflation. 
B)  Cause inflation if the economy is at full employment. 
C)  Cause inflation only if aggregate supply is horizontal. 
D)  Never cause inflation.

Question 8

The Board of Governors of the Federal Reserve System is the key decision maker for monetary policy.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10.Ceteris paribus,if the reserve requirement is decreased to 0.05,then excess reserves will increase by:

Accepted Answer

A)  $1 million. 
B)  $20 million. 
C)  $40 million. 
D)  $2 billion. 
A)  $1 million. 
B)  $20 million. 
C)  $40 million. 
D)  $2 billion.

Question 10

Ceteris paribus,which of the following will occur if the Fed buys bonds through open-market operations?

Accepted Answer

A)  The aggregate supply curve should shift leftward. 
B)  The aggregate supply curve should shift rightward. 
C)  The aggregate demand curve should shift leftward. 
D)  The aggregate demand curve should shift rightward. 
A)  The aggregate supply curve should shift leftward. 
B)  The aggregate supply curve should shift rightward. 
C)  The aggregate demand curve should shift leftward. 
D)  The aggregate demand curve should shift rightward.

Question 11

The 12 regional Fed banks do not:

Accepted Answer

A)  Provide loans to banks. 
B)  Hold reserves for banks. 
C)  Accept deposits from individuals. 
D)  Provide currency to banks. 
A)  Provide loans to banks. 
B)  Hold reserves for banks. 
C)  Accept deposits from individuals. 
D)  Provide currency to banks.

Question 12

The money multiplier:

Accepted Answer

A)  Is the number of deposit dollars the banking system can create from $1 of excess reserves. 
B)  Decreases as the required reserve ratio decreases. 
C)  Is equal to excess reserves plus required reserves. 
D)  Is equal to the required reserve ratio times transactions deposits. 
A)  Is the number of deposit dollars the banking system can create from $1 of excess reserves. 
B)  Decreases as the required reserve ratio decreases. 
C)  Is equal to excess reserves plus required reserves. 
D)  Is equal to the required reserve ratio times transactions deposits.

Question 13

Which of the following is not true about the members of the Federal Reserve Board of Governors?

Accepted Answer

A)  They are appointed to fourteen-year terms by the president of the United States. 
B)  They are relatively immune to short-term political pressures. 
C)  They may not be reappointed after serving a full term. 
D)  They each serve as chairman of the Board of Governors on a rotating basis. 
A)  They are appointed to fourteen-year terms by the president of the United States. 
B)  They are relatively immune to short-term political pressures. 
C)  They may not be reappointed after serving a full term. 
D)  They each serve as chairman of the Board of Governors on a rotating basis.

Question 14

U.S.monetary policy relies on the:

Accepted Answer

A)  Federal Reserve System's control over taxes. 
B)  Federal Reserve System's control over the money supply. 
C)  President's control over the printing of money. 
D)  President's control over interest rates. 
A)  Federal Reserve System's control over taxes. 
B)  Federal Reserve System's control over the money supply. 
C)  President's control over the printing of money. 
D)  President's control over interest rates.

Question 15

Required reserves:

Accepted Answer

A)  Are equal to the required reserve ratio times total reserves. 
B)  Are the minimum amount of reserves a bank is required to hold. 
C)  Represent the dollars a bank can lend. 
D)  Must be held in a bank's vault. 
A)  Are equal to the required reserve ratio times total reserves. 
B)  Are the minimum amount of reserves a bank is required to hold. 
C)  Represent the dollars a bank can lend. 
D)  Must be held in a bank's vault.

Question 16

Monetary policy involves the use of federal government spending to change the money supply.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10.Ceteris paribus,if the reserve requirement is decreased to 0.07,then excess reserves will increase by:

Accepted Answer

A)  $3 million. 
B)  $7 million. 
C)  $10 million. 
D)  $700 billion. 
A)  $3 million. 
B)  $7 million. 
C)  $10 million. 
D)  $700 billion.

Question 18

Aggregate demand is the:

Accepted Answer

A)  Total quantity of output demanded at alternative price levels. 
B)  Total quantity of output demanded but only at full employment. 
C)  Quantity of goods demanded by the largest corporations in the country. 
D)  Quantity of new goods and services produced. 
A)  Total quantity of output demanded at alternative price levels. 
B)  Total quantity of output demanded but only at full employment. 
C)  Quantity of goods demanded by the largest corporations in the country. 
D)  Quantity of new goods and services produced.

Question 19

If the Fed buys more bonds from the public,then the money supply will:

Accepted Answer

A)  Decrease and the aggregate demand curve will shift to the right. 
B)  Increase and the aggregate demand curve will shift to the right. 
C)  Increase and the aggregate demand curve will shift to the left. 
D)  Decrease and the aggregate demand curve will shift to the left. 
A)  Decrease and the aggregate demand curve will shift to the right. 
B)  Increase and the aggregate demand curve will shift to the right. 
C)  Increase and the aggregate demand curve will shift to the left. 
D)  Decrease and the aggregate demand curve will shift to the left.

Question 20

According to the monetarist view,the aggregate supply curve is:

Accepted Answer

A)  Horizontal until full employment is reached and then it becomes vertical. 
B)  Horizontal at all levels of output. 
C)  Vertical at the natural rate of unemployment. 
D)  First horizontal,then upward sloping,and finally vertical. 
A)  Horizontal until full employment is reached and then it becomes vertical. 
B)  Horizontal at all levels of output. 
C)  Vertical at the natural rate of unemployment. 
D)  First horizontal,then upward sloping,and finally vertical.

One of the portfolio choices people must make is whether to deposit idle funds in a bank or purchase government bonds.

Figure 14.2 -Using Figure 14.2,a shift in aggregate demand from AD₄ to AD₅ will cause,ceteris paribus:

The buying and selling of government bonds to influence reserves in the banking system is the responsibility of the:

Figure 14.2 -Using Figure 14.2,a shift in aggregate demand from AD₁ to AD₂ will cause,ceteris paribus:

If the Fed wants to increase bank reserves,it can:

Which of the following will occur if the Fed raises the reserve requirement,ceteris paribus?

According to the Keynesian view of aggregate supply,an increase in the money supply will:

The Board of Governors of the Federal Reserve System is the key decision maker for monetary policy.

Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10.Ceteris paribus,if the reserve requirement is decreased to 0.05,then excess reserves will increase by:

Ceteris paribus,which of the following will occur if the Fed buys bonds through open-market operations?

The 12 regional Fed banks do not:

The money multiplier:

Which of the following is not true about the members of the Federal Reserve Board of Governors?

U.S.monetary policy relies on the:

Required reserves:

Monetary policy involves the use of federal government spending to change the money supply.

Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10.Ceteris paribus,if the reserve requirement is decreased to 0.07,then excess reserves will increase by:

Aggregate demand is the:

If the Fed buys more bonds from the public,then the money supply will:

According to the monetarist view,the aggregate supply curve is:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Economic Growth

Theory and Reality

International Trade

Filters

Exam 14: Monetary Policy

One of the portfolio choices people must make is whether to deposit idle funds in a bank or purchase government bonds.

Figure 14.2 -Using Figure 14.2,a shift in aggregate demand from AD4 to AD5 will cause,ceteris paribus:

The buying and selling of government bonds to influence reserves in the banking system is the responsibility of the:

Figure 14.2 -Using Figure 14.2,a shift in aggregate demand from AD1 to AD2 will cause,ceteris paribus:

If the Fed wants to increase bank reserves,it can:

Which of the following will occur if the Fed raises the reserve requirement,ceteris paribus?

According to the Keynesian view of aggregate supply,an increase in the money supply will:

The Board of Governors of the Federal Reserve System is the key decision maker for monetary policy.

Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10.Ceteris paribus,if the reserve requirement is decreased to 0.05,then excess reserves will increase by:

Ceteris paribus,which of the following will occur if the Fed buys bonds through open-market operations?

The 12 regional Fed banks do not:

The money multiplier:

Which of the following is not true about the members of the Federal Reserve Board of Governors?

U.S.monetary policy relies on the:

Required reserves:

Monetary policy involves the use of federal government spending to change the money supply.

Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10.Ceteris paribus,if the reserve requirement is decreased to 0.07,then excess reserves will increase by:

Aggregate demand is the:

If the Fed buys more bonds from the public,then the money supply will:

According to the monetarist view,the aggregate supply curve is:

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Economic Growth

Theory and Reality

International Trade

Filters

Figure 14.2 -Using Figure 14.2,a shift in aggregate demand from AD₄ to AD₅ will cause,ceteris paribus:

Figure 14.2 -Using Figure 14.2,a shift in aggregate demand from AD₁ to AD₂ will cause,ceteris paribus: