Question 1

Halving the required reserve ratio would, other things being equal,

Accepted Answer

A) double the money supply. 
B) halve the money supply. 
C) increase the money supply, but by less than double. 
D) decrease the money supply, but by more than double. 
A) double the money supply. 
B) halve the money supply. 
C) increase the money supply, but by less than double. 
D) decrease the money supply, but by more than double.

Question 2

If M increases, and V remains constant:

Accepted Answer

A) P must rise. 
B) Q must rise. 
C) P and Q must each rise. 
D) Any of the above may happen, but none of the above must happen. 
A) P must rise. 
B) Q must rise. 
C) P and Q must each rise. 
D) Any of the above may happen, but none of the above must happen.

Question 3

An open market purchase of government securities by the Fed will not tend to result in which of the following, other things being equal?

Accepted Answer

A) increased bond prices 
B) an increase in real output 
C) decreased interest rates 
D) an increase in the price level 
E) All of the above are likely to result from an open market purchase. 
A) increased bond prices 
B) an increase in real output 
C) decreased interest rates 
D) an increase in the price level 
E) All of the above are likely to result from an open market purchase.

Question 4

All decisions of the Fed are subject to approval by:

Accepted Answer

A) the President of the United States. 
B) the U.S. Congress. 
C) the FDIC 
D) none of the above 
A) the President of the United States. 
B) the U.S. Congress. 
C) the FDIC 
D) none of the above

Question 5

There is a positive correlation between a nation's average annual inflation and the degree of independence of its central bank.

Accepted Answer

A) True 
 B)False

Question 6

The primary reason that money is demanded is for:

Accepted Answer

A) transaction purposes. 
B) asset purposes. 
C) precautionary reasons. 
D) investment purposes. 
A) transaction purposes. 
B) asset purposes. 
C) precautionary reasons. 
D) investment purposes.

Question 7

When the money supply decreases, other things being equal,

Accepted Answer

A) real interest rates fall and investment spending rises. 
B) real interest rates fall and investment spending falls. 
C) real interest rates rise and investment spending falls. 
D) real interest rates rise and investment spending rises. 
A) real interest rates fall and investment spending rises. 
B) real interest rates fall and investment spending falls. 
C) real interest rates rise and investment spending falls. 
D) real interest rates rise and investment spending rises.

Question 8

What can the Fed increase to increase the supply of money?

Accepted Answer

A) Open market purchases of government bonds. 
B) Reserve requirements. 
C) The discount rate. 
D) All of these answers are true. 
A) Open market purchases of government bonds. 
B) Reserve requirements. 
C) The discount rate. 
D) All of these answers are true.

Question 9

In the United States, monetary policy is the responsibility of the Federal Reserve Board of Governors and the Federal Open Market Committee.

Accepted Answer

A) True 
 B)False

Question 10

You have the assignment of making a recommendation to the Chairman of the Fed during a period of persistent, high inflation.What could you do to restore stable prices?

Accepted Answer

In order to restore price stab

Question 11

Which of the following would cause the U.S.money supply to expand?

Accepted Answer

A) a commercial bank calling in a loan to build up more excess reserves 
B) a commercial bank purchasing U.S. securities from the Fed as an investment 
C) a decrease in reserve requirements 
D) an increase in the discount rate 
A) a commercial bank calling in a loan to build up more excess reserves 
B) a commercial bank purchasing U.S. securities from the Fed as an investment 
C) a decrease in reserve requirements 
D) an increase in the discount rate

Question 12

An expansionary monetary policy is likely to increase real output more than just temporarily:

Accepted Answer

A) when actual output is beyond the economy's long-run capacity. 
B) when the economy is at full employment. 
C) when the economy operates at less than capacity. 
D) at virtually any output level. 
A) when actual output is beyond the economy's long-run capacity. 
B) when the economy is at full employment. 
C) when the economy operates at less than capacity. 
D) at virtually any output level.

Question 13

Other things being constant, an increase in nominal GDP will generally increase the demand for money.

Accepted Answer

A) True 
 B)False

Question 14

What affects the demand for money?

Accepted Answer

People have three basic motives for hold

Question 15

Which of the following would cause the U.S.money supply to expand?

Accepted Answer

A) a commercial bank using excess reserves to extend a loan to a customer 
B) a commercial bank purchasing U.S. securities from the Fed as an investment 
C) an increase in reserve requirements 
D) an increase in the discount rate 
E) a purchase of U.S. government securities by the Fed 
A) a commercial bank using excess reserves to extend a loan to a customer 
B) a commercial bank purchasing U.S. securities from the Fed as an investment 
C) an increase in reserve requirements 
D) an increase in the discount rate 
E) a purchase of U.S. government securities by the Fed

Question 16

Based on the situation depicted in the graph below, which of the following would be an appropriate monetary policy response?

Accepted Answer

A) decrease reserve requirements 
B) decrease the discount rate 
C) sell government bonds 
D) none of the above 
A) decrease reserve requirements 
B) decrease the discount rate 
C) sell government bonds 
D) none of the above

Question 17

When would the quantity of money demanded by the public tend to increase by the greatest amount?

Accepted Answer

A) The interest rate increases and nominal GDP increases. 
B) The interest rate increases and nominal GDP decreases. 
C) The interest rate decreases and nominal GDP increases. 
D) The interest rate decreases and nominal GDP decreases. 
A) The interest rate increases and nominal GDP increases. 
B) The interest rate increases and nominal GDP decreases. 
C) The interest rate decreases and nominal GDP increases. 
D) The interest rate decreases and nominal GDP decreases.

Question 18

When money demand increases, the Fed cannot keep the money supply from rising and the interest rate from rising at the same time.

Accepted Answer

A) True 
 B)False

Question 19

If the Fed conducted an open market sale of government bonds and raised the discount rate:

Accepted Answer

A) the money supply would increase. 
B) the money supply would decrease. 
C) the money supply would not change. 
D) the money supply could either increase or decrease. 
A) the money supply would increase. 
B) the money supply would decrease. 
C) the money supply would not change. 
D) the money supply could either increase or decrease.

Question 20

If money supply and money demand both fell, but money supply fell more than money demand:

Accepted Answer

A) interest rates would increase and investment would increase. 
B) interest rates would increase and investment would decrease. 
C) interest rates would decrease and investment would increase. 
D) interest rates would decrease and investment would decrease. 
E) the change in interest rates and investment would be indeterminate. 
A) interest rates would increase and investment would increase. 
B) interest rates would increase and investment would decrease. 
C) interest rates would decrease and investment would increase. 
D) interest rates would decrease and investment would decrease. 
E) the change in interest rates and investment would be indeterminate.

Halving the required reserve ratio would, other things being equal,

If M increases, and V remains constant:

An open market purchase of government securities by the Fed will not tend to result in which of the following, other things being equal?

All decisions of the Fed are subject to approval by:

There is a positive correlation between a nation's average annual inflation and the degree of independence of its central bank.

The primary reason that money is demanded is for:

When the money supply decreases, other things being equal,

What can the Fed increase to increase the supply of money?

In the United States, monetary policy is the responsibility of the Federal Reserve Board of Governors and the Federal Open Market Committee.

You have the assignment of making a recommendation to the Chairman of the Fed during a period of persistent, high inflation.What could you do to restore stable prices?

Which of the following would cause the U.S.money supply to expand?

An expansionary monetary policy is likely to increase real output more than just temporarily:

Other things being constant, an increase in nominal GDP will generally increase the demand for money.

What affects the demand for money?

Which of the following would cause the U.S.money supply to expand?

Based on the situation depicted in the graph below, which of the following would be an appropriate monetary policy response?

When would the quantity of money demanded by the public tend to increase by the greatest amount?

When money demand increases, the Fed cannot keep the money supply from rising and the interest rate from rising at the same time.

If the Fed conducted an open market sale of government bonds and raised the discount rate:

If money supply and money demand both fell, but money supply fell more than money demand:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

Issues in Macroeconomic Theory and Policy

International Economics

Filters

Exam 16: The Federal Reserve System and Monetary Policy

Halving the required reserve ratio would, other things being equal,

If M increases, and V remains constant:

An open market purchase of government securities by the Fed will not tend to result in which of the following, other things being equal?

All decisions of the Fed are subject to approval by:

There is a positive correlation between a nation's average annual inflation and the degree of independence of its central bank.

The primary reason that money is demanded is for:

When the money supply decreases, other things being equal,

What can the Fed increase to increase the supply of money?

In the United States, monetary policy is the responsibility of the Federal Reserve Board of Governors and the Federal Open Market Committee.

You have the assignment of making a recommendation to the Chairman of the Fed during a period of persistent, high inflation.What could you do to restore stable prices?

Which of the following would cause the U.S.money supply to expand?

An expansionary monetary policy is likely to increase real output more than just temporarily:

Other things being constant, an increase in nominal GDP will generally increase the demand for money.

What affects the demand for money?

Which of the following would cause the U.S.money supply to expand?

Based on the situation depicted in the graph below, which of the following would be an appropriate monetary policy response?

When would the quantity of money demanded by the public tend to increase by the greatest amount?

When money demand increases, the Fed cannot keep the money supply from rising and the interest rate from rising at the same time.

If the Fed conducted an open market sale of government bonds and raised the discount rate:

If money supply and money demand both fell, but money supply fell more than money demand:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

Issues in Macroeconomic Theory and Policy

International Economics

Filters