Question 1

Which of the following is false about a liquidity trap situation:​

Accepted Answer

A) ​The Fed could not appreciably raise short term interest rates. 
B) ​If the Fed added reserves to the banking system, it would have little effect on investment. 
C) ​Traditional monetary policy would be relatively weak in its effects on aggregate demand. 
D) ​Expansionary monetary policy would tend to increase excess reserves in the banking system. 
A) ​The Fed could not appreciably raise short term interest rates. 
B) ​If the Fed added reserves to the banking system, it would have little effect on investment. 
C) ​Traditional monetary policy would be relatively weak in its effects on aggregate demand. 
D) ​Expansionary monetary policy would tend to increase excess reserves in the banking system.

Question 2

By changing its regulations, the Fed ___ force the banking system to reduce the money supply; by changing its regulations, the Fed ____ force the banking system to increase the money supply:

Accepted Answer

A) ​Can; can 
B) ​Can; cannot 
C) ​Cannot; can 
D) ​Cannot; cannot. 
A) ​Can; can 
B) ​Can; cannot 
C) ​Cannot; can 
D) ​Cannot; cannot.

Question 3

If multiplier effects are ____ than policy makers expect or the natural rate of real output is _____ than expected, monetary policy will tend to overshoot its intended effects.

Accepted Answer

A) ​Greater; greater. 
B) ​Greater; less 
C) ​Less; greater 
D) ​Less; less 
A) ​Greater; greater. 
B) ​Greater; less 
C) ​Less; greater 
D) ​Less; less

Question 4

Which of the following is true about a liquidity trap situation:​

Accepted Answer

A) ​Quantitative easing might be a more effective strategy to stimulate the economy than buying short term government securities. 
B) ​Quantitative easing may be able to affect long term interest rates even when the Fed is unable to appreciably lower short term interest rates. 
C) ​The Fed cannot easily reduce the fed funds interest rate. 
D) ​All of the above are true. 
A) ​Quantitative easing might be a more effective strategy to stimulate the economy than buying short term government securities. 
B) ​Quantitative easing may be able to affect long term interest rates even when the Fed is unable to appreciably lower short term interest rates. 
C) ​The Fed cannot easily reduce the fed funds interest rate. 
D) ​All of the above are true.

Question 5

When Fed policy is addressing either a contractionary or inflationary gap, interest rates will be changed in the same direction as the intended change in real GDP.​

Accepted Answer

A) True 
 B)False

Question 6

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 7

Which of the following is true?

Accepted Answer

A) ​Sometimes the Fed moves to partly offset or even neutralize the intended effects of fiscal policy changes. 
B) ​If a consensus was reached between fiscal and monetary policy makers, you would not expect contractionary fiscal policy and expansionary monetary policy to be adopted at the same time. 
C) ​If policymakers' timing is off, expansionary monetary policy could cause an inflation problem rather than reducing a high unemployment problem. 
D) ​All of the above are true 
A) ​Sometimes the Fed moves to partly offset or even neutralize the intended effects of fiscal policy changes. 
B) ​If a consensus was reached between fiscal and monetary policy makers, you would not expect contractionary fiscal policy and expansionary monetary policy to be adopted at the same time. 
C) ​If policymakers' timing is off, expansionary monetary policy could cause an inflation problem rather than reducing a high unemployment problem. 
D) ​All of the above are true

Question 8

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

Accepted Answer

In the case of persistent, high inflatio

Question 9

When changes in the supply of money are implemented, it makes interest rates change in the _____ direction as the shift in the money supply curve and makes aggregate demand change in the _____ direction as the shift in the money supply curve.

Accepted Answer

A) ​Same; same. 
B) ​Same; opposite. 
C) ​opposite; same. 
D) ​Opposite; opposite. 
A) ​Same; same. 
B) ​Same; opposite. 
C) ​opposite; same. 
D) ​Opposite; opposite.

Question 10

Starting from a position of macroeconomic equilibrium at the full-employment level of real GDP, in the short run, an unanticipated decrease in the money supply will:

Accepted Answer

A) ​raise real interest rates, lower the price level, and reduce real GDP. 
B) ​raise real interest rates, lower the price level, and leave real GDP unchanged. 
C) ​raise nominal interest rates, lower the price level, and leave real GDP unchanged. 
D) ​lower real interest rates, raise the price level, and increase real GDP. 
A) ​raise real interest rates, lower the price level, and reduce real GDP. 
B) ​raise real interest rates, lower the price level, and leave real GDP unchanged. 
C) ​raise nominal interest rates, lower the price level, and leave real GDP unchanged. 
D) ​lower real interest rates, raise the price level, and increase real GDP.

Question 11

If the amount of money in circulation is $50 million and nominal GDP is $150 million, then the velocity of money is:

Accepted Answer

A) ​0.33. 
B) ​2. 
C) ​3. 
D) ​impossible to determine from the information provided. 
A) ​0.33. 
B) ​2. 
C) ​3. 
D) ​impossible to determine from the information provided.

Question 12

Describe what happens to nominal and real interest rates, investment and aggregate demand when money supply shifts right or left, other things equal. When money demand shifts right or left.

Accepted Answer

Whenever nominal interest rates increase

Question 13

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? What would you recommend instead if the problem was persistent high unemployment?

Accepted Answer

In order to restore

Question 14

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 15

If the money supply is held constant as both real and nominal GDP are rising.

Accepted Answer

A) ​the velocity of money will rise. 
B) ​the velocity of money will fall. 
C) ​interest rates will rise. 
D) ​both (a) and (c) 
A) ​the velocity of money will rise. 
B) ​the velocity of money will fall. 
C) ​interest rates will rise. 
D) ​both (a) and (c)

Question 16

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 17

Which of the following is true about the equation of exchange?​

Accepted Answer

A) ​The equation of exchange can be presented as: M   V = P   Q. 
B) ​Velocity represents the average number of times that a dollar is used in purchasing final goods or services in a one-year period. 
C) ​If M increases, and V remains constant, then P must rise and/or Q must rise. 
D) ​All of the above are true about the equation of exchange. 
A) ​The equation of exchange can be presented as: M   V = P   Q. 
B) ​Velocity represents the average number of times that a dollar is used in purchasing final goods or services in a one-year period. 
C) ​If M increases, and V remains constant, then P must rise and/or Q must rise. 
D) ​All of the above are true about the equation of exchange.

Question 18

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 the Fed decreases the interest rate it pays on bank reserves 
C) ​if there is an open market purchase by the Fed. 
D) ​all of the above 
A) ​if reserve requirements are decreased. 
B) ​if the Fed decreases the interest rate it pays on bank reserves 
C) ​if there is an open market purchase by the Fed. 
D) ​all of the above

Question 19

If multiplier effects are ____ than policy makers expect or the natural rate of real output is _____ than expected, monetary policy will tend to undershoot its intended effects.

Accepted Answer

A) ​Greater; greater. 
B) ​Greater; less 
C) ​Less; greater 
D) ​Less; less 
A) ​Greater; greater. 
B) ​Greater; less 
C) ​Less; greater 
D) ​Less; less

Question 20

Monetary policy designed to offset an inflationary gap would:​

Accepted Answer

A) ​Increase interest rates and increase aggregate demand. 
B) ​Increase interest rates and decrease aggregate demand. 
C) ​Decrease interest rates and increase aggregate demand 
D) ​Decrease interest rates and decrease aggregate demand. 
A) ​Increase interest rates and increase aggregate demand. 
B) ​Increase interest rates and decrease aggregate demand. 
C) ​Decrease interest rates and increase aggregate demand 
D) ​Decrease interest rates and decrease aggregate demand.

Exam 18: Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Which of the following is false about a liquidity trap situation:​

By changing its regulations, the Fed ___ force the banking system to reduce the money supply; by changing its regulations, the Fed ____ force the banking system to increase the money supply:

If multiplier effects are ____ than policy makers expect or the natural rate of real output is _____ than expected, monetary policy will tend to overshoot its intended effects.

Which of the following is true about a liquidity trap situation:​

When Fed policy is addressing either a contractionary or inflationary gap, interest rates will be changed in the same direction as the intended change in real GDP.​

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

Which of the following is true?

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

When changes in the supply of money are implemented, it makes interest rates change in the _____ direction as the shift in the money supply curve and makes aggregate demand change in the _____ direction as the shift in the money supply curve.

Starting from a position of macroeconomic equilibrium at the full-employment level of real GDP, in the short run, an unanticipated decrease in the money supply will:

If the amount of money in circulation is $50 million and nominal GDP is $150 million, then the velocity of money is:

Describe what happens to nominal and real interest rates, investment and aggregate demand when money supply shifts right or left, other things equal. When money demand shifts right or left.

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? What would you recommend instead if the problem was persistent high unemployment?

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

If the money supply is held constant as both real and nominal GDP are rising.

The primary reason that money is demanded is for:​

Which of the following is true about the equation of exchange?​

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

If multiplier effects are ____ than policy makers expect or the natural rate of real output is _____ than expected, monetary policy will tend to undershoot its intended effects.

Monetary policy designed to offset an inflationary gap would:​

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Which of the following is false about a liquidity trap situation:

By changing its regulations, the Fed _ force the banking system to reduce the money supply; by changing its regulations, the Fed __ force the banking system to increase the money supply:

If multiplier effects are than policy makers expect or the natural rate of real output is _ than expected, monetary policy will tend to overshoot its intended effects.

Which of the following is true about a liquidity trap situation:

When Fed policy is addressing either a contractionary or inflationary gap, interest rates will be changed in the same direction as the intended change in real GDP.

When changes in the supply of money are implemented, it makes interest rates change in the _ direction as the shift in the money supply curve and makes aggregate demand change in the _ direction as the shift in the money supply curve.

The primary reason that money is demanded is for:

Which of the following is true about the equation of exchange?

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

If multiplier effects are than policy makers expect or the natural rate of real output is _ than expected, monetary policy will tend to undershoot its intended effects.

Monetary policy designed to offset an inflationary gap would: