Question 1

Name four of the six primary functions of the central bank.

Accepted Answer

The six primary func

Question 2

Suppose the banking system as a whole has $600 billion in deposits and $66 billion in reserves, with a reserve ratio of 11 percent.What happens to the stock of money if the Fed lowers reserve requirements by changing the reserve ratio to 10 percent?

Accepted Answer

Under the revised reserve requirements,

Question 3

Outline to the policy choices for contractionary and expansionary options of the Fed.

Accepted Answer

In the case of persistent, high inflatio

Question 4

The combination of an increase in the discount rate and an open market sale of government securities by the Fed will tend to result in:

Accepted Answer

A) a lower loan volume issued by the commercial banking system. 
B) lower bond prices. 
C) increased unemployment in the short run. 
D) a decrease in investment. 
E) all of the above. 
A) a lower loan volume issued by the commercial banking system. 
B) lower bond prices. 
C) increased unemployment in the short run. 
D) a decrease in investment. 
E) all of the above.

Question 5

In the long run, a sustained increase in money supply growth relative to the growth rate of potential real output will most likely:

Accepted Answer

A) cause the nominal interest rate to fall. 
B) cause the real interest rate to fall. 
C) reduce the natural rate of unemployment. 
D) increase real output growth. 
E) do none of the above. 
A) cause the nominal interest rate to fall. 
B) cause the real interest rate to fall. 
C) reduce the natural rate of unemployment. 
D) increase real output growth. 
E) do none of the above.

Question 6

What is the equation of exchange? What are the variables, which are in it, and how do they relate to each other?

Accepted Answer

The equation of exchange can be written

Question 7

Which of the following is the Fed's most common way to change the money supply?

Accepted Answer

A) Moral suasion 
B) The discount rate 
C) The required reserve rate 
D) Open market operations 
A) Moral suasion 
B) The discount rate 
C) The required reserve rate 
D) Open market operations

Question 8

If M increases and V decreases:

Accepted Answer

A) nominal GDP increases. 
B) nominal GDP decreases. 
C) nominal GDP stays the same. 
D) there is an indeterminate effect on nominal GDP. 
A) nominal GDP increases. 
B) nominal GDP decreases. 
C) nominal GDP stays the same. 
D) there is an indeterminate effect on nominal GDP.

Question 9

Which of the following is false?

Accepted Answer

A) The money supply times velocity equals the price level times real GDP. 
B) If individuals are writing lots of checks on their checking accounts and spending currency as fast as they receive it, velocity will tend to be high. 
C) The magnitude of velocity does not depend on the definition of money that is used. 
D) Velocity equals nominal GDP divided by the money supply. 
A) The money supply times velocity equals the price level times real GDP. 
B) If individuals are writing lots of checks on their checking accounts and spending currency as fast as they receive it, velocity will tend to be high. 
C) The magnitude of velocity does not depend on the definition of money that is used. 
D) Velocity equals nominal GDP divided by the money supply.

Question 10

The Federal Reserve banks are owned by:

Accepted Answer

A) the citizens of each Federal Reserve district. 
B) the American people as a whole. 
C) the Federal Government. 
D) commercial banks. 
A) the citizens of each Federal Reserve district. 
B) the American people as a whole. 
C) the Federal Government. 
D) commercial banks.

Question 11

Decisions regarding purchases and sales of securities by the Fed are made by:

Accepted Answer

A) FDIC. 
B) Discount Committee. 
C) Federal Open Market Committee. 
D) Federal Funds Committee. 
A) FDIC. 
B) Discount Committee. 
C) Federal Open Market Committee. 
D) Federal Funds Committee.

Question 12

The interest rate that the Fed charges banks for borrowing funds is called the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 13

Countries with independent central banks tend to have lower inflation rates as well as lower economic growth rates.

Accepted Answer

A) True 
 B)False

Question 14

If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment, which of the following would be most appropriate?

Accepted Answer

A) A larger budget deficit and the purchase of securities in the open market by the Fed 
B) A government surplus and the sale of securities in the open market by the Fed 
C) A larger government deficit and an increase in the discount rate 
D) A larger government surplus and a reduction in the discount rate 
A) A larger budget deficit and the purchase of securities in the open market by the Fed 
B) A government surplus and the sale of securities in the open market by the Fed 
C) A larger government deficit and an increase in the discount rate 
D) A larger government surplus and a reduction in the discount rate

Question 15

If velocity is growing by 2 percent per year and real output is growing 6 percent per year, according to the equation of exchange, in order to maintain stable prices, the money supply would have to:

Accepted Answer

A) grow by 3 percent. 
B) grow by 4 percent. 
C) grow by 8 percent. 
D) grow by 12 percent. 
A) grow by 3 percent. 
B) grow by 4 percent. 
C) grow by 8 percent. 
D) grow by 12 percent.

Question 16

If unemployment is the major problem in the economy, which of the following would be an appropriate monetary policy response?

Accepted Answer

A) decrease taxes 
B) decrease the discount rate 
C) sell government bonds 
D) all of the above 
E) A and B above 
A) decrease taxes 
B) decrease the discount rate 
C) sell government bonds 
D) all of the above 
E) A and B above

Question 17

If policy makers wanted to use both monetary and fiscal policy to help reduce a high rate of inflation, which of the following would be most appropriate?

Accepted Answer

A) a larger budget deficit, the purchase of securities in the open market by the Fed, and a higher discount rate 
B) a government budget surplus, the sale of securities in the open market by the Fed, and a higher discount rate 
C) a larger government budget deficit, the sale of securities in the open market by the Fed, and a lower discount rate 
D) a government budget surplus, the purchase of securities in the open market by the Fed, and a lower discount rate 
A) a larger budget deficit, the purchase of securities in the open market by the Fed, and a higher discount rate 
B) a government budget surplus, the sale of securities in the open market by the Fed, and a higher discount rate 
C) a larger government budget deficit, the sale of securities in the open market by the Fed, and a lower discount rate 
D) a government budget surplus, the purchase of securities in the open market by the Fed, and a lower discount rate

Question 18

If commercial banks are increasing their borrowing from the Fed while the Fed is selling government securities, the borrowing of the commercial banks from the Fed will tend to:

Accepted Answer

A) reinforce the contractionary open market operations policy. 
B) reinforce the expansionary open market operations policy. 
C) counteract the contractionary open market operations policy. 
D) counteract the expansionary open market operations policy. 
A) reinforce the contractionary open market operations policy. 
B) reinforce the expansionary open market operations policy. 
C) counteract the contractionary open market operations policy. 
D) counteract the expansionary open market operations policy.

Question 19

A change in nominal interest rate changes real interest rate by ____ in the short run.

Accepted Answer

A) a smaller amount 
B) a larger amount 
C) the same amount 
D) an indeterminate percent 
A) a smaller amount 
B) a larger amount 
C) the same amount 
D) an indeterminate percent

Question 20

Which of the following pairs of policies shift aggregate demand in the same direction?

Accepted Answer

A) A tax increase and an increase in the money supply. 
B) A transfer payment decrease and an increase in the money supply. 
C) A reduction in government purchases and decline in the money supply. 
D) An increase in government purchases and a decline in the money supply. 
E) None of the above pairs of policies shift aggregate demand in the same direction. 
A) A tax increase and an increase in the money supply. 
B) A transfer payment decrease and an increase in the money supply. 
C) A reduction in government purchases and decline in the money supply. 
D) An increase in government purchases and a decline in the money supply. 
E) None of the above pairs of policies shift aggregate demand in the same direction.

Name four of the six primary functions of the central bank.

Suppose the banking system as a whole has $600 billion in deposits and $66 billion in reserves, with a reserve ratio of 11 percent.What happens to the stock of money if the Fed lowers reserve requirements by changing the reserve ratio to 10 percent?

Outline to the policy choices for contractionary and expansionary options of the Fed.

The combination of an increase in the discount rate and an open market sale of government securities by the Fed will tend to result in:

In the long run, a sustained increase in money supply growth relative to the growth rate of potential real output will most likely:

What is the equation of exchange? What are the variables, which are in it, and how do they relate to each other?

Which of the following is the Fed's most common way to change the money supply?

If M increases and V decreases:

Which of the following is false?

The Federal Reserve banks are owned by:

Decisions regarding purchases and sales of securities by the Fed are made by:

The interest rate that the Fed charges banks for borrowing funds is called the federal funds rate.

Countries with independent central banks tend to have lower inflation rates as well as lower economic growth rates.

If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment, which of the following would be most appropriate?

If velocity is growing by 2 percent per year and real output is growing 6 percent per year, according to the equation of exchange, in order to maintain stable prices, the money supply would have to:

If unemployment is the major problem in the economy, which of the following would be an appropriate monetary policy response?

If policy makers wanted to use both monetary and fiscal policy to help reduce a high rate of inflation, which of the following would be most appropriate?

If commercial banks are increasing their borrowing from the Fed while the Fed is selling government securities, the borrowing of the commercial banks from the Fed will tend to:

A change in nominal interest rate changes real interest rate by ____ in the short run.

Which of the following pairs of policies shift aggregate demand in the same direction?

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

Name four of the six primary functions of the central bank.

Suppose the banking system as a whole has $600 billion in deposits and $66 billion in reserves, with a reserve ratio of 11 percent.What happens to the stock of money if the Fed lowers reserve requirements by changing the reserve ratio to 10 percent?

Outline to the policy choices for contractionary and expansionary options of the Fed.

The combination of an increase in the discount rate and an open market sale of government securities by the Fed will tend to result in:

In the long run, a sustained increase in money supply growth relative to the growth rate of potential real output will most likely:

What is the equation of exchange? What are the variables, which are in it, and how do they relate to each other?

Which of the following is the Fed's most common way to change the money supply?

If M increases and V decreases:

Which of the following is false?

The Federal Reserve banks are owned by:

Decisions regarding purchases and sales of securities by the Fed are made by:

The interest rate that the Fed charges banks for borrowing funds is called the federal funds rate.

Countries with independent central banks tend to have lower inflation rates as well as lower economic growth rates.

If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment, which of the following would be most appropriate?

If velocity is growing by 2 percent per year and real output is growing 6 percent per year, according to the equation of exchange, in order to maintain stable prices, the money supply would have to:

If unemployment is the major problem in the economy, which of the following would be an appropriate monetary policy response?

If policy makers wanted to use both monetary and fiscal policy to help reduce a high rate of inflation, which of the following would be most appropriate?

If commercial banks are increasing their borrowing from the Fed while the Fed is selling government securities, the borrowing of the commercial banks from the Fed will tend to:

A change in nominal interest rate changes real interest rate by ____ in the short run.

Which of the following pairs of policies shift aggregate demand in the same direction?

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