Question 1

An increase in the interest rate should ________ the demand for dollars and the value of the dollar,and net exports should ________.

Accepted Answer

A) decrease; decrease 
B) decrease; increase 
C) increase; decrease 
D) increase; increase 
E) increase; not change 
A) decrease; decrease 
B) decrease; increase 
C) increase; decrease 
D) increase; increase 
E) increase; not change

Question 2

Which of the following would cause the money demand curve to shift to the left?

Accepted Answer

A) an open market purchase of Treasury securities by the Federal Reserve 
B) an increase in the interest rate 
C) an increase in the price level 
D) a decrease in real GDP 
A) an open market purchase of Treasury securities by the Federal Reserve 
B) an increase in the interest rate 
C) an increase in the price level 
D) a decrease in real GDP

Question 3

Inflation targeting is a framework for carrying out monetary policy whereby

Accepted Answer

A) the central bank adopts a rigid target for inflation and ignores declines in output. 
B) the central bank commits to achieving a publicly announced level of inflation. 
C) the central bank commits to achieving a target level of inflation which is never announced publicly. 
D) the central bank commits to a monetary growth rule. 
A) the central bank adopts a rigid target for inflation and ignores declines in output. 
B) the central bank commits to achieving a publicly announced level of inflation. 
C) the central bank commits to achieving a target level of inflation which is never announced publicly. 
D) the central bank commits to a monetary growth rule.

Question 4

If the probability of losing your job remains ________,a recession would be a good time to purchase a home because the Fed usually ________ interest rates during this time.

Accepted Answer

A) low; lowers 
B) low; raises 
C) high; lowers 
D) high; raises 
E) low; does not change 
A) low; lowers 
B) low; raises 
C) high; lowers 
D) high; raises 
E) low; does not change

Question 5

When the Federal Reserve increases the money supply,at the previous equilibrium interest rate households and firms will now have

Accepted Answer

A) more money than they want to hold. 
B) less money than they want to hold. 
C) the amount of money that they want to hold. 
D) to sell Treasury bills. 
A) more money than they want to hold. 
B) less money than they want to hold. 
C) the amount of money that they want to hold. 
D) to sell Treasury bills.

Question 6

Which of the following is true about the Federal Reserve and its ability to prevent recessions? The Federal Reserve

Accepted Answer

A) does not try to eliminate recessions,but instead focuses on preventing inflation. 
B) can fine tune the economy and realistically hope to keep the economy from experiencing recessions. 
C) cannot realistically fine tune the economy,but seeks to keep recessions shorter and milder than they would otherwise be. 
D) cannot realistically fine tune the economy and has little to no effect on the magnitude and length of recessions. 
A) does not try to eliminate recessions,but instead focuses on preventing inflation. 
B) can fine tune the economy and realistically hope to keep the economy from experiencing recessions. 
C) cannot realistically fine tune the economy,but seeks to keep recessions shorter and milder than they would otherwise be. 
D) cannot realistically fine tune the economy and has little to no effect on the magnitude and length of recessions.

Question 7

The Fed can use expansionary monetary policy to lower interest rates to stimulate aggregate demand.

Accepted Answer

A) True 
 B)False

Question 8

With the Troubled Asset Relief Program (TARP),the Treasury provided funds to banks in exchange for stock.

Accepted Answer

A) True 
 B)False

Question 9

Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

Accepted Answer

If the economy is in recession,it is cur

Question 10

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP equals potential GDP,then the federal funds target rate equals the

Accepted Answer

A) current discount rate. 
B) current inflation rate. 
C) real equilibrium federal funds rate. 
D) current inflation rate plus the real equilibrium federal funds rate. 
A) current discount rate. 
B) current inflation rate. 
C) real equilibrium federal funds rate. 
D) current inflation rate plus the real equilibrium federal funds rate.

Question 11

Inflation targeting,typically,has been accompanied by lower inflation.

Accepted Answer

A) True 
 B)False

Question 12

Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP.

Accepted Answer

A) True 
 B)False

Question 13

When housing prices fell as they did beginning in 2006 following the housing market bubble,most banks and other lenders ________ the requirement for borrowers,making it ________ for potential home buyers to obtain mortgages.

Accepted Answer

A) tightened; easier 
B) tightened; harder 
C) eased; easier 
D) eased; harder 
A) tightened; easier 
B) tightened; harder 
C) eased; easier 
D) eased; harder

Question 14

Figure 15-11
 
-Refer to Figure 15-11.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

Accepted Answer

A) there is pressure on wages and prices to rise. 
B) the unemployment rate is very,very low. 
C) firms are operating above their normal capacity. 
D) the economy is below full employment. 
E) incomes and profits are rising. 
A) there is pressure on wages and prices to rise. 
B) the unemployment rate is very,very low. 
C) firms are operating above their normal capacity. 
D) the economy is below full employment. 
E) incomes and profits are rising.

Question 15

Figure 15-16  
-Refer to Figure 15-16.In the figure above,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Federal Reserve use to move the economy to point C?

Accepted Answer

A) decrease income taxes 
B) decrease the required-reserve ratio 
C) buy Treasury bills 
D) sell Treasury bills 
A) decrease income taxes 
B) decrease the required-reserve ratio 
C) buy Treasury bills 
D) sell Treasury bills

Question 16

In the countries that have adopted inflation targeting,the inflation rate has typically

Accepted Answer

A) increased. 
B) decreased. 
C) decreased to zero. 
D) not changed. 
A) increased. 
B) decreased. 
C) decreased to zero. 
D) not changed.

Question 17

The Federal Reserve can directly affect its monetary policy ________,which then affect its monetary policy ________.

Accepted Answer

A) goals; targets 
B) goals; tools 
C) targets; goals 
D) targets; tools 
A) goals; targets 
B) goals; tools 
C) targets; goals 
D) targets; tools

Question 18

Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

Accepted Answer

If the economy is experiencing inflation

Question 19

The dynamic aggregate demand and aggregate supply model accounts for the price level rising every year.

Accepted Answer

A) True 
 B)False

Question 20

Table 15-1
  
-Refer to Table 15-1.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2015 if the Fed does not use monetary policy.Which of the following policies makes sense if the Fed wants to keep real GDP at its potential level in 2015?

Accepted Answer

A) The trading desk should sell Treasury securities. 
B) The Fed should lower the target for the federal funds rate. 
C) The Fed should pursue contractionary policy. 
D) The Fed should lower capital gains taxes. 
A) The trading desk should sell Treasury securities. 
B) The Fed should lower the target for the federal funds rate. 
C) The Fed should pursue contractionary policy. 
D) The Fed should lower capital gains taxes.

An increase in the interest rate should the demand for dollars and the value of the dollar,and net exports should .

Which of the following would cause the money demand curve to shift to the left?

Inflation targeting is a framework for carrying out monetary policy whereby

If the probability of losing your job remains ,a recession would be a good time to purchase a home because the Fed usually interest rates during this time.

When the Federal Reserve increases the money supply,at the previous equilibrium interest rate households and firms will now have

Which of the following is true about the Federal Reserve and its ability to prevent recessions? The Federal Reserve

The Fed can use expansionary monetary policy to lower interest rates to stimulate aggregate demand.

With the Troubled Asset Relief Program (TARP),the Treasury provided funds to banks in exchange for stock.

Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP equals potential GDP,then the federal funds target rate equals the

Inflation targeting,typically,has been accompanied by lower inflation.

Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP.

When housing prices fell as they did beginning in 2006 following the housing market bubble,most banks and other lenders the requirement for borrowers,making it for potential home buyers to obtain mortgages.

Figure 15-11 -Refer to Figure 15-11.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

Figure 15-16 -Refer to Figure 15-16.In the figure above,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Federal Reserve use to move the economy to point C?

In the countries that have adopted inflation targeting,the inflation rate has typically

The Federal Reserve can directly affect its monetary policy ,which then affect its monetary policy .

Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

The dynamic aggregate demand and aggregate supply model accounts for the price level rising every year.

Table 15-1 -Refer to Table 15-1.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2015 if the Fed does not use monetary policy.Which of the following policies makes sense if the Fed wants to keep real GDP at its potential level in 2015?

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 15: Monetary Policy

An increase in the interest rate should ________ the demand for dollars and the value of the dollar,and net exports should ________.

Which of the following would cause the money demand curve to shift to the left?

Inflation targeting is a framework for carrying out monetary policy whereby

If the probability of losing your job remains ________,a recession would be a good time to purchase a home because the Fed usually ________ interest rates during this time.

When the Federal Reserve increases the money supply,at the previous equilibrium interest rate households and firms will now have

Which of the following is true about the Federal Reserve and its ability to prevent recessions? The Federal Reserve

The Fed can use expansionary monetary policy to lower interest rates to stimulate aggregate demand.

With the Troubled Asset Relief Program (TARP),the Treasury provided funds to banks in exchange for stock.

Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP equals potential GDP,then the federal funds target rate equals the

Inflation targeting,typically,has been accompanied by lower inflation.

Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP.

When housing prices fell as they did beginning in 2006 following the housing market bubble,most banks and other lenders ________ the requirement for borrowers,making it ________ for potential home buyers to obtain mortgages.

Figure 15-11 -Refer to Figure 15-11.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues no policy,then at point B

Figure 15-16 -Refer to Figure 15-16.In the figure above,suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.Which of the following policies could the Federal Reserve use to move the economy to point C?

In the countries that have adopted inflation targeting,the inflation rate has typically

The Federal Reserve can directly affect its monetary policy ________,which then affect its monetary policy ________.

Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

The dynamic aggregate demand and aggregate supply model accounts for the price level rising every year.

Table 15-1 -Refer to Table 15-1.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2015 if the Fed does not use monetary policy.Which of the following policies makes sense if the Fed wants to keep real GDP at its potential level in 2015?

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

An increase in the interest rate should the demand for dollars and the value of the dollar,and net exports should .

If the probability of losing your job remains ,a recession would be a good time to purchase a home because the Fed usually interest rates during this time.

When housing prices fell as they did beginning in 2006 following the housing market bubble,most banks and other lenders the requirement for borrowers,making it for potential home buyers to obtain mortgages.

The Federal Reserve can directly affect its monetary policy ,which then affect its monetary policy .