Question 1

The federal funds rate

Accepted Answer

A) is determined administratively by the Fed. 
B) is determined by the supply of and demand for bank reserves. 
C) is determined directly by household demand for funds. 
D) is determined directly by firm demand for funds. 
A) is determined administratively by the Fed. 
B) is determined by the supply of and demand for bank reserves. 
C) is determined directly by household demand for funds. 
D) is determined directly by firm demand for funds.

Question 2

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

Accepted Answer

A) fell; easier 
B) fell; harder 
C) rose; easier 
D) rose; harder 
A) fell; easier 
B) fell; harder 
C) rose; easier 
D) rose; harder

Question 3

Changes in the federal funds rate usually result in

Accepted Answer

A) changes in both short-term and long-term interest rates with more of an effect on short-term interest rates. 
B) changes in both short-term and long-term interest rates with more of an effect on long-term interest rates. 
C) changes in both short-term and long-term interest rates with equal effect on both. 
D) no change in both short-term and long-term interest rates. 
A) changes in both short-term and long-term interest rates with more of an effect on short-term interest rates. 
B) changes in both short-term and long-term interest rates with more of an effect on long-term interest rates. 
C) changes in both short-term and long-term interest rates with equal effect on both. 
D) no change in both short-term and long-term interest rates.

Question 4

Figure 15-3  
-Refer to Figure 15-3.In the figure above,when the money supply shifts from MS1 to MS2,at the interest rate of 3 percent households and firms will

Accepted Answer

A) buy Treasury bills. 
B) sell Treasury bills. 
C) neither buy nor sell Treasury bills. 
D) want to hold more money. 
A) buy Treasury bills. 
B) sell Treasury bills. 
C) neither buy nor sell Treasury bills. 
D) want to hold more money.

Question 5

Figure 15-15  
-Refer to Figure 15-15.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) increase the required-reserve ratio 
C) buy Treasury bills 
D) sell Treasury bills 
A) decrease income taxes 
B) increase the required-reserve ratio 
C) buy Treasury bills 
D) sell Treasury bills

Question 6

The Fed can increase the federal funds rate by

Accepted Answer

A) selling Treasury bills,which increases bank reserves. 
B) buying Treasury bills,which increases bank reserves. 
C) selling Treasury bills,which decreases bank reserves. 
D) buying Treasury bills,which decreases bank reserves. 
A) selling Treasury bills,which increases bank reserves. 
B) buying Treasury bills,which increases bank reserves. 
C) selling Treasury bills,which decreases bank reserves. 
D) buying Treasury bills,which decreases bank reserves.

Question 7

The supporters of a monetary growth rule believe that active monetary policy

Accepted Answer

A) stabilizes the economy,decreasing the number of recessions and their severity. 
B) destabilizes the economy,increasing the number of recessions and their severity. 
C) cannot change the inflation rate. 
D) cannot change real GDP. 
A) stabilizes the economy,decreasing the number of recessions and their severity. 
B) destabilizes the economy,increasing the number of recessions and their severity. 
C) cannot change the inflation rate. 
D) cannot change real GDP.

Question 8

Lowering the interest rate will

Accepted Answer

A) decrease spending on consumer durables. 
B) increase investment projects by firms. 
C) decrease spending on new homes. 
D) decrease the value of the dollar and lower net exports. 
A) decrease spending on consumer durables. 
B) increase investment projects by firms. 
C) decrease spending on new homes. 
D) decrease the value of the dollar and lower net exports.

Question 9

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

Accepted Answer

A) short-term real interest rates; long-term nominal interest rates 
B) short-term nominal interest rates; long-term nominal interest rates 
C) short-term real interest rates; long-term real interest rates 
D) short-term nominal interest rates; long-term real interest rates 
A) short-term real interest rates; long-term nominal interest rates 
B) short-term nominal interest rates; long-term nominal interest rates 
C) short-term real interest rates; long-term real interest rates 
D) short-term nominal interest rates; long-term real interest rates

Question 10

Contractionary monetary policy causes

Accepted Answer

A) aggregate demand to rise and the price level to rise. 
B) aggregate demand to fall and the price level to fall. 
C) aggregate demand to rise and the price level to fall. 
D) aggregate demand to fall and the price level to rise. 
A) aggregate demand to rise and the price level to rise. 
B) aggregate demand to fall and the price level to fall. 
C) aggregate demand to rise and the price level to fall. 
D) aggregate demand to fall and the price level to rise.

Question 11

When the price of a financial asset ________ its interest rate will ________.

Accepted Answer

A) rises; rise 
B) falls; fall 
C) falls; rise 
D) rises; remain the same 
A) rises; rise 
B) falls; fall 
C) falls; rise 
D) rises; remain the same

Question 12

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Accepted Answer

A) higher; higher 
B) higher; lower 
C) lower; higher 
D) lower; lower 
A) higher; higher 
B) higher; lower 
C) lower; higher 
D) lower; lower

Question 13

Write out the expression for the Taylor rule.Use the Taylor rule to explain how a decline in real GDP below potential GDP will affect the Federal Reserve's target for the federal funds rate.

Accepted Answer

The Taylor rule states that the Fed shou

Question 14

The federal funds rate is

Accepted Answer

A) the interest rate the Fed charges commercial banks. 
B) the interest rate a bank charges its best customers. 
C) the interest rate banks charge each other for overnight loans. 
D) the interest rate on a Treasury Bill. 
A) the interest rate the Fed charges commercial banks. 
B) the interest rate a bank charges its best customers. 
C) the interest rate banks charge each other for overnight loans. 
D) the interest rate on a Treasury Bill.

Question 15

The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing.

Accepted Answer

A) True 
 B)False

Question 16

Under the monetary growth rule proposed by the monetarists,the money supply would grow each year at a constant rate equal to the long-run rate of growth of

Accepted Answer

A) inflation. 
B) real GDP. 
C) interest rates. 
D) employment. 
A) inflation. 
B) real GDP. 
C) interest rates. 
D) employment.

Question 17

Expansionary monetary policy refers to the Fed's increasing the money supply and increasing interest rates to increase real GDP.

Accepted Answer

A) True 
 B)False

Question 18

The money supply curve is vertical if

Accepted Answer

A) banks and the Fed jointly determine the money supply. 
B) the Fed is able to completely determine the money supply. 
C) banks and households determine the money supply. 
D) households and the Fed jointly determine the money supply. 
A) banks and the Fed jointly determine the money supply. 
B) the Fed is able to completely determine the money supply. 
C) banks and households determine the money supply. 
D) households and the Fed jointly determine the money supply.

Question 19

Your income will increase if the Federal Reserve buys a Treasury bill from you and pays you with a check from the Fed.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would most likely induce the Federal Reserve to conduct expansionary monetary policy? A significant decrease in

Accepted Answer

A) oil prices. 
B) business taxes. 
C) income tax rates. 
D) investment spending. 
A) oil prices. 
B) business taxes. 
C) income tax rates. 
D) investment spending.

The federal funds rate

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

Changes in the federal funds rate usually result in

Figure 15-3 -Refer to Figure 15-3.In the figure above,when the money supply shifts from MS₁ to MS₂,at the interest rate of 3 percent households and firms will

Figure 15-15 -Refer to Figure 15-15.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?

The Fed can increase the federal funds rate by

The supporters of a monetary growth rule believe that active monetary policy

Lowering the interest rate will

The money market model is concerned with and the loanable funds market model is concerned with .

Contractionary monetary policy causes

When the price of a financial asset its interest rate will .

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be and real GDP to be .

Write out the expression for the Taylor rule.Use the Taylor rule to explain how a decline in real GDP below potential GDP will affect the Federal Reserve's target for the federal funds rate.

The federal funds rate is

The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing.

Under the monetary growth rule proposed by the monetarists,the money supply would grow each year at a constant rate equal to the long-run rate of growth of

Expansionary monetary policy refers to the Fed's increasing the money supply and increasing interest rates to increase real GDP.

The money supply curve is vertical if

Your income will increase if the Federal Reserve buys a Treasury bill from you and pays you with a check from the Fed.

Which of the following would most likely induce the Federal Reserve to conduct expansionary monetary policy? A significant decrease in

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

The federal funds rate

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

Changes in the federal funds rate usually result in

Figure 15-3 -Refer to Figure 15-3.In the figure above,when the money supply shifts from MS1 to MS2,at the interest rate of 3 percent households and firms will

Figure 15-15 -Refer to Figure 15-15.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?

The Fed can increase the federal funds rate by

The supporters of a monetary growth rule believe that active monetary policy

Lowering the interest rate will

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

Contractionary monetary policy causes

When the price of a financial asset ________ its interest rate will ________.

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Write out the expression for the Taylor rule.Use the Taylor rule to explain how a decline in real GDP below potential GDP will affect the Federal Reserve's target for the federal funds rate.

The federal funds rate is

The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing.

Under the monetary growth rule proposed by the monetarists,the money supply would grow each year at a constant rate equal to the long-run rate of growth of

Expansionary monetary policy refers to the Fed's increasing the money supply and increasing interest rates to increase real GDP.

The money supply curve is vertical if

Your income will increase if the Federal Reserve buys a Treasury bill from you and pays you with a check from the Fed.

Which of the following would most likely induce the Federal Reserve to conduct expansionary monetary policy? A significant decrease in

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

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

Figure 15-3 -Refer to Figure 15-3.In the figure above,when the money supply shifts from MS₁ to MS₂,at the interest rate of 3 percent households and firms will

The money market model is concerned with and the loanable funds market model is concerned with .

When the price of a financial asset its interest rate will .

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be and real GDP to be .