Question 1

Why is the change in reserve requirement not frequently used to control the supply of money?

Accepted Answer

Though reserve requirement change can be

Question 2

The Fed's purchases and sales of government securities are called:

Accepted Answer

A) margin operations. 
B) open market operations. 
C) small-dealer transactions. 
D) intermediary transactions. 
A) margin operations. 
B) open market operations. 
C) small-dealer transactions. 
D) intermediary transactions.

Question 3

Which of the following is most frequently used when the Fed is attempting to adjust the money supply?

Accepted Answer

A) Changing reserve requirements 
B) Open market operations 
C) Changing the discount rate 
D) Moral suasion 
E) all of the above 
A) Changing reserve requirements 
B) Open market operations 
C) Changing the discount rate 
D) Moral suasion 
E) all of the above

Question 4

Other things equal, the level of real GDP will tend to increase in the short run:

Accepted Answer

A) if reserve requirements are decreased. 
B) if there is a reduction in the discount rate. 
C) if there is an open market purchase by the Fed. 
D) in all of the above cases. 
E) in none of the above cases. 
A) if reserve requirements are decreased. 
B) if there is a reduction in the discount rate. 
C) if there is an open market purchase by the Fed. 
D) in all of the above cases. 
E) in none of the above cases.

Question 5

If the Fed was trying to reduce demand-pull inflation, it might:

Accepted Answer

A) sell government securities, lower reserve requirements and lower the discount rate. 
B) sell government securities, raise reserve requirements and raise the discount rate. 
C) sell government securities, lower reserve requirements and raise the discount rate. 
D) buy government securities, lower reserve requirements and raise the discount rate. 
A) sell government securities, lower reserve requirements and lower the discount rate. 
B) sell government securities, raise reserve requirements and raise the discount rate. 
C) sell government securities, lower reserve requirements and raise the discount rate. 
D) buy government securities, lower reserve requirements and raise the discount rate.

Question 6

Which of the following is not one variable in the equation of exchange?

Accepted Answer

A) Real output. 
B) The interest rate. 
C) The money supply. 
D) The price level. 
E) The velocity of money. 
A) Real output. 
B) The interest rate. 
C) The money supply. 
D) The price level. 
E) The velocity of money.

Question 7

The most likely impact of an unanticipated increase in the money supply is a(n):

Accepted Answer

A) increase in the real interest rate, which in turn stimulates investment and GDP. 
B) decrease in the real interest rate, which in turn stimulates investment and GDP. 
C) decrease in real output, which causes the real interest rate to decline and in turn stimulate investment and GDP. 
D) increase in real output, which causes the real interest rate to decline. 
A) increase in the real interest rate, which in turn stimulates investment and GDP. 
B) decrease in the real interest rate, which in turn stimulates investment and GDP. 
C) decrease in real output, which causes the real interest rate to decline and in turn stimulate investment and GDP. 
D) increase in real output, which causes the real interest rate to decline.

Question 8

An increase in M or an increase in V, other things equal, would definitely increase:

Accepted Answer

A) the price level. 
B) real GDP. 
C) nominal GDP. 
D) unemployment. 
A) the price level. 
B) real GDP. 
C) nominal GDP. 
D) unemployment.

Question 9

An increase in the interest rates will

Accepted Answer

A) cause people to hold less money, which, in turn, means that the velocity of money increases. 
B) cause people to hold less money, which, in turn, means that the velocity of money decreases. 
C) cause people to hold more money, which, in turn, means that the velocity of money increases. 
D) cause people to hold more money, which, in turn, means that the velocity of money decreases. 
A) cause people to hold less money, which, in turn, means that the velocity of money increases. 
B) cause people to hold less money, which, in turn, means that the velocity of money decreases. 
C) cause people to hold more money, which, in turn, means that the velocity of money increases. 
D) cause people to hold more money, which, in turn, means that the velocity of money decreases.

Question 10

When the Fed purchases government securities from a commercial bank, the bank:

Accepted Answer

A) automatically becomes poorer. 
B) loses equity in the Fed. 
C) receives reserves that can be used to make additional loans. 
D) loses its ability to make loans. 
A) automatically becomes poorer. 
B) loses equity in the Fed. 
C) receives reserves that can be used to make additional loans. 
D) loses its ability to make loans.

Question 11

When interest rates are higher:

Accepted Answer

A) the opportunity cost of holding monetary assets is higher, and the quantity of money demanded, but not the demand for money, is lower. 
B) the opportunity cost of holding monetary assets is higher, and the demand for money increases. 
C) the opportunity cost of holding monetary assets is lower, and the quantity of money demanded, but not the demand for money, is greater. 
D) the opportunity cost of holding monetary assets is lower, and the demand for money increases. 
A) the opportunity cost of holding monetary assets is higher, and the quantity of money demanded, but not the demand for money, is lower. 
B) the opportunity cost of holding monetary assets is higher, and the demand for money increases. 
C) the opportunity cost of holding monetary assets is lower, and the quantity of money demanded, but not the demand for money, is greater. 
D) the opportunity cost of holding monetary assets is lower, and the demand for money increases.

Question 12

The money supply is very sensitive to changes in the rate of interest.

Accepted Answer

A) True 
 B)False

Question 13

Rising reserve requirements, other things being equal, would tend to:

Accepted Answer

A) increase the dollar volume of loans made by the banking system. 
B) increase the money supply. 
C) increase aggregate demand. 
D) do all of the above. 
E) do none of the above. 
A) increase the dollar volume of loans made by the banking system. 
B) increase the money supply. 
C) increase aggregate demand. 
D) do all of the above. 
E) do none of the above.

Why is the change in reserve requirement not frequently used to control the supply of money?

The Fed's purchases and sales of government securities are called:

Which of the following is most frequently used when the Fed is attempting to adjust the money supply?

Other things equal, the level of real GDP will tend to increase in the short run:

If the Fed was trying to reduce demand-pull inflation, it might:

Which of the following is not one variable in the equation of exchange?

The most likely impact of an unanticipated increase in the money supply is a(n):

An increase in M or an increase in V, other things equal, would definitely increase:

An increase in the interest rates will

When the Fed purchases government securities from a commercial bank, the bank:

When interest rates are higher:

The money supply is very sensitive to changes in the rate of interest.

Rising reserve requirements, other things being equal, would tend to:

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

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Exam 16: The Federal Reserve System and Monetary Policy

Why is the change in reserve requirement not frequently used to control the supply of money?

The Fed's purchases and sales of government securities are called:

Which of the following is most frequently used when the Fed is attempting to adjust the money supply?

Other things equal, the level of real GDP will tend to increase in the short run:

If the Fed was trying to reduce demand-pull inflation, it might:

Which of the following is not one variable in the equation of exchange?

The most likely impact of an unanticipated increase in the money supply is a(n):

An increase in M or an increase in V, other things equal, would definitely increase:

An increase in the interest rates will

When the Fed purchases government securities from a commercial bank, the bank:

When interest rates are higher:

The money supply is very sensitive to changes in the rate of interest.

Rising reserve requirements, other things being equal, would tend to:

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