Exam 16: Interest Rates and Monetary Policy

If nominal GDP is $2,000 billion and the amount of money demanded for transactions purposes is $500 billion, then on average each dollar will be spent about four times a year.

The interest rate will fall when the:

Refer to the graphs above, in which the numbers in parentheses near the AD₁, AD₂, and AD₃ labels indicate the level of investment spending associated with each curve, respectively. All numbers are in billions of dollars. The interest rate and the level of investment spending in the economy are at point D on the investment demand curve. To achieve the long-run goal of a noninflationary full-employment output Q_f in the economy, the Fed should try to:

Traditionally, the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in its target for the:

Typically the largest asset item in the Federal Reserve Banks' consolidated balance sheet (as illustrated in the book, for April 2013) is:

Which of the following statements is true?

Which of the following best describes what occurs when monetary authorities sell government securities?

Changes in interest rates, ceteris paribus, cause a shift in:

A decrease in the nominal GDP, other things remaining the same, will decrease both the total demand for money and the equilibrium rate of interest in the economy.

Refer to the table above. Suppose that the transactions demand for money is $300 billion and the money supply is $700 billion. A decrease in the money supply to $600 billion would cause the interest rate to:

The lending ability of commercial banks increases when the:

Which of the following is considered an advantage of monetary policy compared to fiscal policy?

Lowering the discount rate has the effect of:

Refer to the graph above, in which D_t is the transactions demand for money, D_m is the total demand for money, and S_m is the supply of money. The market is in equilibrium at the 6 percent rate of interest. If the money supply then decreases as shown, the transaction demand for money will change by:

A few years ago, you bought a bond with no expiration and a fixed annual interest payment of $1000 at a price of $10,000. If the interest rate in the economy is now 12.5% a year and you want to sell the bond, the maximum price that you can get for it is:

Which one of the following is a tool of monetary policy often used by the Fed for altering the reserves of commercial banks?

The interest rate that the Fed charges banks for loans to them through the traditional channel is called:

If the Fed sells government securities to the general public in the open market:

Other things equal, an appreciation of the U.S. dollar would:

Which of the following statements about quantitative easing (or "QE") and open market purchase is true?