Question 1

The money multiplier:

Accepted Answer

A)  Is equal to the required reserve ratio times transactions deposits. 
B)  Gets larger as the required reserve ratio increases. 
C)  Is the reciprocal of the required reserve ratio. 
D)  Represents the lending capacity of an individual bank. 
A)  Is equal to the required reserve ratio times transactions deposits. 
B)  Gets larger as the required reserve ratio increases. 
C)  Is the reciprocal of the required reserve ratio. 
D)  Represents the lending capacity of an individual bank.

Question 2

Which of the following is not a monetary policy tool for shifting the aggregate demand curve?

Accepted Answer

A)  Open-market operations. 
B)  Government spending. 
C)  The discount rate. 
D)  The reserve requirement. 
A)  Open-market operations. 
B)  Government spending. 
C)  The discount rate. 
D)  The reserve requirement.

Question 3

Discretionary policy calls for continual adjustments to the money supply and is associated with the monetarist perspective.

Accepted Answer

A) True 
 B)False

Question 4

Using aggregate supply and demand curves drawn according to the Keynesian view,which of the following will occur if the Fed buys bonds in the open market and the economy is below full employment?

Accepted Answer

A)  Aggregate demand will shift to the left and the unemployment rate will rise. 
B)  Aggregate demand will shift to the right and the unemployment rate will fall. 
C)  Aggregate demand will shift to the left and the price level will remain unchanged. 
D)  Aggregate demand will shift to the right and the price level will fall. 
A)  Aggregate demand will shift to the left and the unemployment rate will rise. 
B)  Aggregate demand will shift to the right and the unemployment rate will fall. 
C)  Aggregate demand will shift to the left and the price level will remain unchanged. 
D)  Aggregate demand will shift to the right and the price level will fall.

Question 5

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet.
  
-Using the reserve requirement in Table 14.1,if the Fed sells $15 billion worth of bonds in the open market,the lending capacity of the banking system will _______ by approximately ______.

Accepted Answer

A)  Rise;$150 billion 
B)  Rise;$113 billion 
C)  Fall;$150 billion 
D)  Fall;$113 billion 
A)  Rise;$150 billion 
B)  Rise;$113 billion 
C)  Fall;$150 billion 
D)  Fall;$113 billion

Question 6

The chairman of the Federal Reserve Board of Governors:

Accepted Answer

A)  Is elected by U.S.voters. 
B)  Will typically change following each presidential election. 
C)  Serves a four-year term and can be reappointed. 
D)  Is always closely tied to the same political party as the president. 
A)  Is elected by U.S.voters. 
B)  Will typically change following each presidential election. 
C)  Serves a four-year term and can be reappointed. 
D)  Is always closely tied to the same political party as the president.

Question 7

When the Fed makes bonds more or less attractive,it influences the:

Accepted Answer

A)  Open market decision. 
B)  Money multiplier. 
C)  Portfolio decision. 
D)  Reserve decision. 
A)  Open market decision. 
B)  Money multiplier. 
C)  Portfolio decision. 
D)  Reserve decision.

Question 8

Which of the following serves as the central banker for private banks in the United States?

Accepted Answer

A)  The 12 regional Federal Reserve banks. 
B)  The Executive Branch of government. 
C)  The Board of Governors of the Federal Reserve System. 
D)  The Fed Open Market Committee. 
A)  The 12 regional Federal Reserve banks. 
B)  The Executive Branch of government. 
C)  The Board of Governors of the Federal Reserve System. 
D)  The Fed Open Market Committee.

Question 9

All of the following are true about the basic money supply except:

Accepted Answer

A)  It includes credit card balances. 
B)  It includes currency held by the public. 
C)  It includes money kept in transactions accounts. 
D)  It is known as M1. 
A)  It includes credit card balances. 
B)  It includes currency held by the public. 
C)  It includes money kept in transactions accounts. 
D)  It is known as M1.

Question 10

Which of the following policies supports the concept of continual adjustment of the money supply to achieve macroeconomic goals?

Accepted Answer

A)  Restrictive policy. 
B)  Fixed rules. 
C)  Discretionary policy. 
D)  Fiscal policy. 
A)  Restrictive policy. 
B)  Fixed rules. 
C)  Discretionary policy. 
D)  Fiscal policy.

Question 11

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet.
  
-Considering only the information in Table 14.2,the basic money supply is:

Accepted Answer

A)  $260 billion. 
B)  $600 billion. 
C)  $660 billion. 
D)  $900 billion. 
A)  $260 billion. 
B)  $600 billion. 
C)  $660 billion. 
D)  $900 billion.

Question 12

If the Fed sells more bonds to 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 13

Which of the following will cause a decrease in aggregate demand?

Accepted Answer

A)  Restrictive monetary policy. 
B)  A decrease in the reserve requirement. 
C)  Expansionary monetary policy. 
D)  The purchase of bonds by the Fed. 
A)  Restrictive monetary policy. 
B)  A decrease in the reserve requirement. 
C)  Expansionary monetary policy. 
D)  The purchase of bonds by the Fed.

Question 14

An eclectic aggregate supply curve:

Accepted Answer

A)  Is the supply-side counterpart to monetarist and Keynesian assumptions about the shape of aggregate demand. 
B)  Combines elements of the monetarist and Keynesian assumptions about the shape of aggregate supply. 
C)  Maintains a constant upward slope as the economy moves through the business cycle. 
D)  Is horizontal at all levels of output. 
A)  Is the supply-side counterpart to monetarist and Keynesian assumptions about the shape of aggregate demand. 
B)  Combines elements of the monetarist and Keynesian assumptions about the shape of aggregate supply. 
C)  Maintains a constant upward slope as the economy moves through the business cycle. 
D)  Is horizontal at all levels of output.

Question 15

Proponents of monetary policy based on fixed rules base their position on the assumption of a vertical aggregate supply curve.

Accepted Answer

A) True 
 B)False

Question 16

The shape of the _____ curve determines the impact of an aggregate demand shift on prices and output.

Accepted Answer

A)  Marginal revenue 
B)  Total cost 
C)  Production possibilities 
D)  Aggregate supply 
A)  Marginal revenue 
B)  Total cost 
C)  Production possibilities 
D)  Aggregate supply

Question 17

The Board of Governors consists of seven members elected by the public every four years.

Accepted Answer

A) True 
 B)False

Question 18

Ceteris paribus,if the Fed reduces the reserve requirement,then:

Accepted Answer

A)  Total reserves increase. 
B)  Total deposits decrease. 
C)  The lending capacity of the banking system increases. 
D)  The money multiplier decreases. 
A)  Total reserves increase. 
B)  Total deposits decrease. 
C)  The lending capacity of the banking system increases. 
D)  The money multiplier decreases.

Question 19

The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as:

Accepted Answer

A)  Open-market operations. 
B)  Closed-market operations. 
C)  Discounting. 
D)  Expansionary fiscal policy. 
A)  Open-market operations. 
B)  Closed-market operations. 
C)  Discounting. 
D)  Expansionary fiscal policy.

Question 20

To increase the money supply the Fed can:

Accepted Answer

A)  Reduce the reserve requirement,reduce the discount rate,or sell bonds. 
B)  Raise the reserve requirement,reduce the discount rate,or sell bonds. 
C)  Reduce the reserve requirement,reduce the discount rate,or buy bonds. 
D)  Raise the reserve requirement,raise the discount rate,or buy bonds. 
A)  Reduce the reserve requirement,reduce the discount rate,or sell bonds. 
B)  Raise the reserve requirement,reduce the discount rate,or sell bonds. 
C)  Reduce the reserve requirement,reduce the discount rate,or buy bonds. 
D)  Raise the reserve requirement,raise the discount rate,or buy bonds.

The money multiplier:

Which of the following is not a monetary policy tool for shifting the aggregate demand curve?

Discretionary policy calls for continual adjustments to the money supply and is associated with the monetarist perspective.

Using aggregate supply and demand curves drawn according to the Keynesian view,which of the following will occur if the Fed buys bonds in the open market and the economy is below full employment?

The chairman of the Federal Reserve Board of Governors:

When the Fed makes bonds more or less attractive,it influences the:

Which of the following serves as the central banker for private banks in the United States?

All of the following are true about the basic money supply except:

Which of the following policies supports the concept of continual adjustment of the money supply to achieve macroeconomic goals?

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet. -Considering only the information in Table 14.2,the basic money supply is:

If the Fed sells more bonds to the public,then the money supply will:

Which of the following will cause a decrease in aggregate demand?

An eclectic aggregate supply curve:

Proponents of monetary policy based on fixed rules base their position on the assumption of a vertical aggregate supply curve.

The shape of the _____ curve determines the impact of an aggregate demand shift on prices and output.

The Board of Governors consists of seven members elected by the public every four years.

Ceteris paribus,if the Fed reduces the reserve requirement,then:

The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as:

To increase the money supply the Fed can:

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

The money multiplier:

Which of the following is not a monetary policy tool for shifting the aggregate demand curve?

Discretionary policy calls for continual adjustments to the money supply and is associated with the monetarist perspective.

Using aggregate supply and demand curves drawn according to the Keynesian view,which of the following will occur if the Fed buys bonds in the open market and the economy is below full employment?

The chairman of the Federal Reserve Board of Governors:

When the Fed makes bonds more or less attractive,it influences the:

Which of the following serves as the central banker for private banks in the United States?

All of the following are true about the basic money supply except:

Which of the following policies supports the concept of continual adjustment of the money supply to achieve macroeconomic goals?

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet. -Considering only the information in Table 14.2,the basic money supply is:

If the Fed sells more bonds to the public,then the money supply will:

Which of the following will cause a decrease in aggregate demand?

An eclectic aggregate supply curve:

Proponents of monetary policy based on fixed rules base their position on the assumption of a vertical aggregate supply curve.

The shape of the _____ curve determines the impact of an aggregate demand shift on prices and output.

The Board of Governors consists of seven members elected by the public every four years.

Ceteris paribus,if the Fed reduces the reserve requirement,then:

The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as:

To increase the money supply the Fed can:

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