Question 1

What is the maximum number of voting members of the FOMC?

Accepted Answer

A)  4 
B)  7 
C)  11 
D)  12 
A)  4 
B)  7 
C)  11 
D)  12

Question 2

The demand for money refers to the desire to

Accepted Answer

A)  hold a good that yields utility when it is consumed. 
B)  a high income. 
C)  spend money because money is used in all transactions. 
D)  hold money because money is used in all non-barter transactions. 
A)  hold a good that yields utility when it is consumed. 
B)  a high income. 
C)  spend money because money is used in all transactions. 
D)  hold money because money is used in all non-barter transactions.

Question 3

-In the above figure, if the economy is in equilibrium at E1, then

Accepted Answer

A)  the economy is producing below its potential long-run equilibrium at full employment. 
B)  the economy is producing above its potential long-run equilibrium at full employment. 
C)  there is an inflationary gap in the economy. 
D)  the economy is in a period of high inflation. 
A)  the economy is producing below its potential long-run equilibrium at full employment. 
B)  the economy is producing above its potential long-run equilibrium at full employment. 
C)  there is an inflationary gap in the economy. 
D)  the economy is in a period of high inflation.

Question 4

If the interest rate increases, the

Accepted Answer

A)  quantity of money demanded will remain unchanged. 
B)  money demand curve will shift to the right. 
C)  money demand curve will shift to the left. 
D)  quantity of money demanded will fall. 
A)  quantity of money demanded will remain unchanged. 
B)  money demand curve will shift to the right. 
C)  money demand curve will shift to the left. 
D)  quantity of money demanded will fall.

Question 5

According to Keynes, the impact of a decrease in the money supply is a

Accepted Answer

A)  lower interest rate and larger growth in real GDP. 
B)  lower interest rate and smaller growth in real GDP. 
C)  higher interest rate and larger growth in real GDP. 
D)  higher interest rate and smaller growth in real GDP. 
A)  lower interest rate and larger growth in real GDP. 
B)  lower interest rate and smaller growth in real GDP. 
C)  higher interest rate and larger growth in real GDP. 
D)  higher interest rate and smaller growth in real GDP.

Question 6

Suppose the actual equilibrium federal funds rate is above the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

Accepted Answer

A)  fiscal policy is contractionary. 
B)  fiscal policy is expansionary. 
C)  monetary policy is expansionary. 
D)  monetary policy is contractionary. 
A)  fiscal policy is contractionary. 
B)  fiscal policy is expansionary. 
C)  monetary policy is expansionary. 
D)  monetary policy is contractionary.

Question 7

-Look at the above figure. Suppose the economy was initially in equilibrium at point A. What point would represent the short-run equilibrium if the Fed makes an open market purchase of bonds?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 8

When the Fed conducts open market operations, it

Accepted Answer

A)  purchases or sells government bonds issued by the U.S. Treasury. 
B)  is engaging in fiscal policy. 
C)  also raises taxes at the same time. 
D)  shifts the demand for money curve. 
A)  purchases or sells government bonds issued by the U.S. Treasury. 
B)  is engaging in fiscal policy. 
C)  also raises taxes at the same time. 
D)  shifts the demand for money curve.

Question 9

Which of the following is TRUE of the Fed's credit policy?

Accepted Answer

A)  The Fed has implemented a credit policy since 1914. 
B)  Today about 40 percent of the Fed's asset holdings are related to its conduct of credit policy. 
C)  The Fed's credit policy is extended only to U.S. financial institutions. 
D)  The Fed's objective for its credit policy is to reduce the federal funds rate. 
A)  The Fed has implemented a credit policy since 1914. 
B)  Today about 40 percent of the Fed's asset holdings are related to its conduct of credit policy. 
C)  The Fed's credit policy is extended only to U.S. financial institutions. 
D)  The Fed's objective for its credit policy is to reduce the federal funds rate.

Question 10

Which of the following will NOT occur in the short run when the money supply decreases?

Accepted Answer

A)  People will buy fewer goods and services. 
B)  The interest rate will increase. 
C)  Aggregate supply decreases. 
D)  The price level decreases. 
A)  People will buy fewer goods and services. 
B)  The interest rate will increase. 
C)  Aggregate supply decreases. 
D)  The price level decreases.

Question 11

The monetary transmission mechanism that assumes that money supply growth stimulates the economy primarily by encouraging investment is

Accepted Answer

A)  the interest-rate-based transmission mechanism. 
B)  the classical transmission mechanism. 
C)  the post-Keynesian transmission mechanism. 
D)  pre-Keynesian transmission mechanism. 
A)  the interest-rate-based transmission mechanism. 
B)  the classical transmission mechanism. 
C)  the post-Keynesian transmission mechanism. 
D)  pre-Keynesian transmission mechanism.

Question 12

Which Federal Reserve Bank now regularly tracks target levels for the federal funds rate predicted by a basic Taylor-rule equation?

Accepted Answer

A)  Boston 
B)  Chicago 
C)  New York 
D)  St. Louis 
A)  Boston 
B)  Chicago 
C)  New York 
D)  St. Louis

Question 13

Suppose the actual equilibrium federal funds rate is below the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

Accepted Answer

A)  fiscal policy is contractionary. 
B)  fiscal policy is expansionary. 
C)  monetary policy is expansionary. 
D)  monetary policy is contractionary. 
A)  fiscal policy is contractionary. 
B)  fiscal policy is expansionary. 
C)  monetary policy is expansionary. 
D)  monetary policy is contractionary.

Question 14

Other things being equal, the quantity theory of money suggests that any increase in the money supply

Accepted Answer

A)  causes a reduction in the demand for money. 
B)  results in a decrease in the aggregate price level. 
C)  causes the aggregate level of nominal Gross Domestic Product (GDP) to fall. 
D)  results in a proportionate increase in the price level. 
A)  causes a reduction in the demand for money. 
B)  results in a decrease in the aggregate price level. 
C)  causes the aggregate level of nominal Gross Domestic Product (GDP) to fall. 
D)  results in a proportionate increase in the price level.

Question 15

When the rate of interest in the economy increases

Accepted Answer

A)  the market price of existing bonds will fall. 
B)  the transaction demand for money will increase. 
C)  real Gross Domestic Product (GDP) will increase. 
D)  the asset demand for money will increase. 
A)  the market price of existing bonds will fall. 
B)  the transaction demand for money will increase. 
C)  real Gross Domestic Product (GDP) will increase. 
D)  the asset demand for money will increase.

Question 16

When households choose to hold money as a store of value, rather than holding assets such as certificates of deposit, stocks, and bonds, ________ demand for money results.

Accepted Answer

A)  liquidity 
B)  transactions 
C)  precautionary 
D)  asset 
A)  liquidity 
B)  transactions 
C)  precautionary 
D)  asset

Question 17

-Refer to the above figure. Which panel is consistent with the Fed buying bonds?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 18

-In the above figure, assume the aggregate demand of the economy is AD2 and the Fed actions move aggregate demand to AD1. In this situation, the Fed has practiced

Accepted Answer

A)  contractionary monetary policy. 
B)  expansionary monetary policy. 
C)  irresponsible fiscal policy. 
D)  Keynesian fiscal policy. 
A)  contractionary monetary policy. 
B)  expansionary monetary policy. 
C)  irresponsible fiscal policy. 
D)  Keynesian fiscal policy.

Question 19

According to Keynes, the impact of an increase in the money supply is

Accepted Answer

A)  a lower interest rate and a larger growth in real GDP. 
B)  a lower interest rate and a smaller growth in real GDP. 
C)  a higher interest rate and a larger growth in real GDP. 
D)  a higher interest rate and a smaller growth in real GDP. 
A)  a lower interest rate and a larger growth in real GDP. 
B)  a lower interest rate and a smaller growth in real GDP. 
C)  a higher interest rate and a larger growth in real GDP. 
D)  a higher interest rate and a smaller growth in real GDP.

Question 20

The interest-rate-based monetary policy transmission mechanism suggests that the changes in the money supply affect aggregate spending

Accepted Answer

A)  indirectly through interest rates and planned investment spending. 
B)  directly through interest rates and planned consumption spending. 
C)  indirectly through tax rates and planned consumption spending. 
D)  directly through interest rates and planned government spending. 
A)  indirectly through interest rates and planned investment spending. 
B)  directly through interest rates and planned consumption spending. 
C)  indirectly through tax rates and planned consumption spending. 
D)  directly through interest rates and planned government spending.

Exam 16: Domestic and International Dimensions of Monetary Policy

What is the maximum number of voting members of the FOMC?

The demand for money refers to the desire to

-In the above figure, if the economy is in equilibrium at E1, then

If the interest rate increases, the

According to Keynes, the impact of a decrease in the money supply is a

Suppose the actual equilibrium federal funds rate is above the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

-Look at the above figure. Suppose the economy was initially in equilibrium at point A. What point would represent the short-run equilibrium if the Fed makes an open market purchase of bonds?

When the Fed conducts open market operations, it

Which of the following is TRUE of the Fed's credit policy?

Which of the following will NOT occur in the short run when the money supply decreases?

The monetary transmission mechanism that assumes that money supply growth stimulates the economy primarily by encouraging investment is

Which Federal Reserve Bank now regularly tracks target levels for the federal funds rate predicted by a basic Taylor-rule equation?

Suppose the actual equilibrium federal funds rate is below the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that

Other things being equal, the quantity theory of money suggests that any increase in the money supply

When the rate of interest in the economy increases

When households choose to hold money as a store of value, rather than holding assets such as certificates of deposit, stocks, and bonds, ________ demand for money results.

-Refer to the above figure. Which panel is consistent with the Fed buying bonds?

-In the above figure, assume the aggregate demand of the economy is AD2 and the Fed actions move aggregate demand to AD1. In this situation, the Fed has practiced

According to Keynes, the impact of an increase in the money supply is

The interest-rate-based monetary policy transmission mechanism suggests that the changes in the money supply affect aggregate spending

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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