Question 1

When the Federal Reserve decreases the money supply,at the previous equilibrium interest rate households and firms will now want to

Accepted Answer

A) buy Treasury bills. 
B) sell Treasury bills. 
C) neither buy nor sell Treasury bills. 
D) hold less money. 
A) buy Treasury bills. 
B) sell Treasury bills. 
C) neither buy nor sell Treasury bills. 
D) hold less money.

Question 2

In response to already low interest rates doing little to stimulate the economy,the Fed announced a new program in September 2011 under which it would purchase long-term Treasury securities while selling an equal amount of shorter-term Treasury securities.This policy was known as

Accepted Answer

A) inflation targeting. 
B) Operation Twist. 
C) securities-bubble deflating. 
D) quantitative easing. 
A) inflation targeting. 
B) Operation Twist. 
C) securities-bubble deflating. 
D) quantitative easing.

Question 3

The Fed can increase the federal funds rate by

Accepted Answer

A) selling Treasury bills,which increases bank reserves. 
B) buying Treasury bills,which increases bank reserves. 
C) selling Treasury bills,which decreases bank reserves. 
D) buying Treasury bills,which decreases bank reserves. 
A) selling Treasury bills,which increases bank reserves. 
B) buying Treasury bills,which increases bank reserves. 
C) selling Treasury bills,which decreases bank reserves. 
D) buying Treasury bills,which decreases bank reserves.

Question 4

Beginning in 2008,The Federal Reserve and the U.S.Treasury Department responded to the financial crisis by intervening in financial markets in unprecedented ways.Briefly summarize the actions of the Fed and Treasury.

Accepted Answer

Among the actions taken by the Fed and T

Question 5

Would the Federal Reserve respond more aggressively with interest rate cuts in a recession caused by a decrease in spending,as in the 2001 recession,than in a recession caused by an increase in oil prices,as in the 1974-75 recession?

Accepted Answer

The inflation rate responds differently

Question 6

Firms that participate in regular open market transactions with the Federal Reserve are called

Accepted Answer

A) secondary market banks. 
B) Treasury banks. 
C) primary dealers. 
D) Federal Reserve partners. 
A) secondary market banks. 
B) Treasury banks. 
C) primary dealers. 
D) Federal Reserve partners.

Question 7

Which of the following statements about inflation targeting is true?

Accepted Answer

A) Inflation targeting by the central banks in other countries has not typically lowered inflation. 
B) Inflation targeting would not reduce the flexibility of monetary policy to address other policy goals. 
C) Inflation targeting would not allow the central bank the flexibility to take action against a severe recession. 
D) Inflation targeting would make it easier for households and firms to form accurate expectations of future inflation,improving their planning and the efficiency of the economy. 
A) Inflation targeting by the central banks in other countries has not typically lowered inflation. 
B) Inflation targeting would not reduce the flexibility of monetary policy to address other policy goals. 
C) Inflation targeting would not allow the central bank the flexibility to take action against a severe recession. 
D) Inflation targeting would make it easier for households and firms to form accurate expectations of future inflation,improving their planning and the efficiency of the economy.

Question 8

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the Federal Reserve to conduct an expansionary monetary policy.Briefly explain the condition of the economy and what the Federal Reserve is attempting to do.

Accepted Answer

The Federal Reserve conducts an expansio

Question 9

The Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is not one of the ways the Fed responded?

Accepted Answer

A) The Fed made investment banks eligible for discount loans. 
B) The Fed lent investment banks Treasury securities in exchange for mortgage-backed securities. 
C) The Fed lowered the required reserve ratio on demand deposit accounts in order to increase the amount of bank reserves. 
D) The Fed helped JP Morgan to acquire Bear Stearns,a nearly bankrupt investment bank. 
A) The Fed made investment banks eligible for discount loans. 
B) The Fed lent investment banks Treasury securities in exchange for mortgage-backed securities. 
C) The Fed lowered the required reserve ratio on demand deposit accounts in order to increase the amount of bank reserves. 
D) The Fed helped JP Morgan to acquire Bear Stearns,a nearly bankrupt investment bank.

Question 10

A borrower defaults on a loan when he stops making payments on the loan.

Accepted Answer

A) True 
 B)False

Question 11

If the Federal Reserve targets the money supply,and the money demand curve shifts to the left,then the Fed

Accepted Answer

A) cannot maintain the money supply target. 
B) can maintain the money supply target,but at a lower interest rate. 
C) can maintain the money supply target,but at a higher interest rate. 
D) can maintain the money supply target with no change in the interest rate. 
A) cannot maintain the money supply target. 
B) can maintain the money supply target,but at a lower interest rate. 
C) can maintain the money supply target,but at a higher interest rate. 
D) can maintain the money supply target with no change in the interest rate.

Question 12

Changes in interest rates affect all four components of aggregate demand.

Accepted Answer

A) True 
 B)False

Question 13

An increase in the demand for Treasury bills will

Accepted Answer

A) increase the price of Treasury bills. 
B) increase the interest rate on Treasury bills. 
C) increase the opportunity cost of holding money vs.Treasury bills. 
D) eventually cause households to hold less money. 
A) increase the price of Treasury bills. 
B) increase the interest rate on Treasury bills. 
C) increase the opportunity cost of holding money vs.Treasury bills. 
D) eventually cause households to hold less money.

Question 14

What actions should the Fed take if it believes the economy is about to fall into recession?

Accepted Answer

If the Fed believes the economy is about

Question 15

Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

Accepted Answer

If the economy is in recession,it is cur

Question 16

The money demand curve has a

Accepted Answer

A) negative slope because an increase in the interest rate decreases the quantity of money demanded. 
B) positive slope because an increase in the interest rate increases the quantity of money demanded. 
C) negative slope because an increase in the price level decreases the quantity of money demanded. 
D) positive slope because an increase in the price level increases the quantity of money demanded. 
A) negative slope because an increase in the interest rate decreases the quantity of money demanded. 
B) positive slope because an increase in the interest rate increases the quantity of money demanded. 
C) negative slope because an increase in the price level decreases the quantity of money demanded. 
D) positive slope because an increase in the price level increases the quantity of money demanded.

Question 17

Monetary policy refers to the actions the

Accepted Answer

A) President and Congress take to manage the money supply and interest rates to pursue their economic objectives. 
B) Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives. 
C) President and Congress take to manage government spending and taxes to pursue their economic objectives. 
D) Federal Reserve takes to manage government spending and taxes to pursue its economic objectives. 
A) President and Congress take to manage the money supply and interest rates to pursue their economic objectives. 
B) Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives. 
C) President and Congress take to manage government spending and taxes to pursue their economic objectives. 
D) Federal Reserve takes to manage government spending and taxes to pursue its economic objectives.

Question 18

During the turmoil in the market for subprime mortgages in 2007 and 2008,the Fed increased the volume of discount loans.The goal of the Fed was to

Accepted Answer

A) reduce the rate of inflation. 
B) stimulate economic growth. 
C) reduce unemployment. 
D) reassure financial markets and promote financial stability. 
E) reduce the current account deficit. 
A) reduce the rate of inflation. 
B) stimulate economic growth. 
C) reduce unemployment. 
D) reassure financial markets and promote financial stability. 
E) reduce the current account deficit.

Question 19

Although the Federal Reserve had traditionally made discount loans only to commercial banks,in response to to the financial crisis in 2008 the Fed made ________ eligible for discount loans as well.

Accepted Answer

A) the Treasury Department 
B) mortgage brokers 
C) savings banks 
D) primary dealers 
A) the Treasury Department 
B) mortgage brokers 
C) savings banks 
D) primary dealers

Question 20

Which of the following statements about inflation targeting is true?

Accepted Answer

A) Inflation targeting would not allow the central bank the flexibility to take action against a severe recession. 
B) Inflation targeting has been adopted by the central banks of fewer than five countries. 
C) With changes in leadership over time at the Federal Reserve,inflation targeting could help institutionalize good U.S.monetary policy. 
D) Inflation targeting is practiced strongly in the United States but is ignored in Europe. 
A) Inflation targeting would not allow the central bank the flexibility to take action against a severe recession. 
B) Inflation targeting has been adopted by the central banks of fewer than five countries. 
C) With changes in leadership over time at the Federal Reserve,inflation targeting could help institutionalize good U.S.monetary policy. 
D) Inflation targeting is practiced strongly in the United States but is ignored in Europe.

When the Federal Reserve decreases the money supply,at the previous equilibrium interest rate households and firms will now want to

In response to already low interest rates doing little to stimulate the economy,the Fed announced a new program in September 2011 under which it would purchase long-term Treasury securities while selling an equal amount of shorter-term Treasury securities.This policy was known as

The Fed can increase the federal funds rate by

Beginning in 2008,The Federal Reserve and the U.S.Treasury Department responded to the financial crisis by intervening in financial markets in unprecedented ways.Briefly summarize the actions of the Fed and Treasury.

Would the Federal Reserve respond more aggressively with interest rate cuts in a recession caused by a decrease in spending,as in the 2001 recession,than in a recession caused by an increase in oil prices,as in the 1974-75 recession?

Firms that participate in regular open market transactions with the Federal Reserve are called

Which of the following statements about inflation targeting is true?

The Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is not one of the ways the Fed responded?

A borrower defaults on a loan when he stops making payments on the loan.

If the Federal Reserve targets the money supply,and the money demand curve shifts to the left,then the Fed

Changes in interest rates affect all four components of aggregate demand.

An increase in the demand for Treasury bills will

What actions should the Fed take if it believes the economy is about to fall into recession?

Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

The money demand curve has a

Monetary policy refers to the actions the

During the turmoil in the market for subprime mortgages in 2007 and 2008,the Fed increased the volume of discount loans.The goal of the Fed was to

Although the Federal Reserve had traditionally made discount loans only to commercial banks,in response to to the financial crisis in 2008 the Fed made ________ eligible for discount loans as well.

Which of the following statements about inflation targeting is true?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

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Exam 17: Monetary Policy

When the Federal Reserve decreases the money supply,at the previous equilibrium interest rate households and firms will now want to

In response to already low interest rates doing little to stimulate the economy,the Fed announced a new program in September 2011 under which it would purchase long-term Treasury securities while selling an equal amount of shorter-term Treasury securities.This policy was known as

The Fed can increase the federal funds rate by

Beginning in 2008,The Federal Reserve and the U.S.Treasury Department responded to the financial crisis by intervening in financial markets in unprecedented ways.Briefly summarize the actions of the Fed and Treasury.

Would the Federal Reserve respond more aggressively with interest rate cuts in a recession caused by a decrease in spending,as in the 2001 recession,than in a recession caused by an increase in oil prices,as in the 1974-75 recession?

Firms that participate in regular open market transactions with the Federal Reserve are called

Which of the following statements about inflation targeting is true?

The Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is not one of the ways the Fed responded?

A borrower defaults on a loan when he stops making payments on the loan.

If the Federal Reserve targets the money supply,and the money demand curve shifts to the left,then the Fed

Changes in interest rates affect all four components of aggregate demand.

An increase in the demand for Treasury bills will

What actions should the Fed take if it believes the economy is about to fall into recession?

Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

The money demand curve has a

Monetary policy refers to the actions the

During the turmoil in the market for subprime mortgages in 2007 and 2008,the Fed increased the volume of discount loans.The goal of the Fed was to

Although the Federal Reserve had traditionally made discount loans only to commercial banks,in response to to the financial crisis in 2008 the Fed made ________ eligible for discount loans as well.

Which of the following statements about inflation targeting is true?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters