Question 1

Using the money demand and money supply model,an open market purchase of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to

Accepted Answer

A) increase. 
B) decrease. 
C) not change. 
D) increase if the economy is in a recession. 
A) increase. 
B) decrease. 
C) not change. 
D) increase if the economy is in a recession.

Question 2

Expansionary monetary policy refers to the ________ to increase real GDP.

Accepted Answer

A) government's increasing spending and lowering taxes 
B) government's decreasing spending and raising taxes 
C) Federal Reserve's increasing the money supply and decreasing interest rates 
D) Federal Reserve's decreasing the money supply and increasing interest rates 
A) government's increasing spending and lowering taxes 
B) government's decreasing spending and raising taxes 
C) Federal Reserve's increasing the money supply and decreasing interest rates 
D) Federal Reserve's decreasing the money supply and increasing interest rates

Question 3

Table 17-1
  
-Refer to Table 17-1.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2015 if the Fed does not use monetary policy.Which of the following policies makes sense if the Fed wants to keep real GDP at its potential level in 2015?

Accepted Answer

A) The trading desk should sell Treasury securities. 
B) The Fed should lower the target for the federal funds rate. 
C) The Fed should pursue contractionary policy. 
D) The Fed should lower capital gains taxes. 
A) The trading desk should sell Treasury securities. 
B) The Fed should lower the target for the federal funds rate. 
C) The Fed should pursue contractionary policy. 
D) The Fed should lower capital gains taxes.

Question 4

An increase in the interest rate causes

Accepted Answer

A) a movement up along the money demand curve. 
B) a movement down along the money demand curve. 
C) the money demand curve to shift to the left. 
D) the money demand curve to shift to the right. 
A) a movement up along the money demand curve. 
B) a movement down along the money demand curve. 
C) the money demand curve to shift to the left. 
D) the money demand curve to shift to the right.

Question 5

The relationship between GDP and the money supply has gotten stronger since the 1980s.

Accepted Answer

A) True 
 B)False

Question 6

Figure 17-6  
-Refer to Figure 17-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,the Federal Reserve would most likely

Accepted Answer

A) increase interest rates. 
B) decrease interest rates. 
C) not change interest rates. 
D) decrease the inflation rate. 
A) increase interest rates. 
B) decrease interest rates. 
C) not change interest rates. 
D) decrease the inflation rate.

Question 7

Most of the pressure for a monetary growth rule has disappeared because since 1980,

Accepted Answer

A) the relationship between movements in the money supply and movements in real GDP and the price level have become much stronger. 
B) the relationship between movements in the money supply and movements in real GDP and the price level have become much weaker. 
C) the relationship between movements in interest rates and movements in real GDP and the price level have become much stronger. 
D) the relationship between movements in interest rates and movements in real GDP and the price level have become much weaker. 
A) the relationship between movements in the money supply and movements in real GDP and the price level have become much stronger. 
B) the relationship between movements in the money supply and movements in real GDP and the price level have become much weaker. 
C) the relationship between movements in interest rates and movements in real GDP and the price level have become much stronger. 
D) the relationship between movements in interest rates and movements in real GDP and the price level have become much weaker.

Question 8

Using the money demand and money supply model,an increase in money demand would cause the equilibrium interest rate to

Accepted Answer

A) decrease. 
B) increase. 
C) not change. 
D) increase,then decrease. 
A) decrease. 
B) increase. 
C) not change. 
D) increase,then decrease.

Question 9

According to the Taylor rule,does the target for the federal funds rate respond differently for an increase in inflation caused by an increase in aggregate demand and for an increase in inflation caused by a decrease in short-run aggregate supply? Explain whether there is or is not a difference in how the target for the federal funds rate changes.

Accepted Answer

The target for the federal funds rate re

Question 10

Which of the following would cause the money demand curve to shift to the left?

Accepted Answer

A) an open market purchase of Treasury securities by the Federal Reserve 
B) an increase in the interest rate 
C) an increase in the price level 
D) a decrease in real GDP 
A) an open market purchase of Treasury securities by the Federal Reserve 
B) an increase in the interest rate 
C) an increase in the price level 
D) a decrease in real GDP

Question 11

When the Federal Reserve increases the money supply,at the previous equilibrium interest rate households and firms will now have

Accepted Answer

A) more money than they want to hold. 
B) less money than they want to hold. 
C) the amount of money that they want to hold. 
D) to sell Treasury bills. 
A) more money than they want to hold. 
B) less money than they want to hold. 
C) the amount of money that they want to hold. 
D) to sell Treasury bills.

Question 12

List the Fed's four main monetary goals.

Accepted Answer

1.Price stability
2.High emplo

Question 13

The Federal Reserve can directly affect its monetary policy ________,which then affect its monetary policy ________.

Accepted Answer

A) goals;targets 
B) goals;tools 
C) targets;goals 
D) targets;tools 
A) goals;targets 
B) goals;tools 
C) targets;goals 
D) targets;tools

Question 14

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is less than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

Accepted Answer

A) will be greater than 
B) will be less than 
C) will be the same as 
D) may be greater than or less than 
A) will be greater than 
B) will be less than 
C) will be the same as 
D) may be greater than or less than

Question 15

Most economists believe that the best monetary policy target is

Accepted Answer

A) an interest rate. 
B) the money supply. 
C) total bank reserves. 
D) the discount rate. 
A) an interest rate. 
B) the money supply. 
C) total bank reserves. 
D) the discount rate.

Question 16

Figure 17-6  
-Refer to Figure 17-6.In the dynamic model of AD-AS in the figure above,the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues policy.This will result in

Accepted Answer

A) unemployment rates higher than what would occur if no policy had been pursued. 
B) inflation higher than what would occur if no policy had been pursued. 
C) real GDP lower than what would occur if no policy had been pursued. 
D) short-term interest rates higher than what would occur if no policy had been pursued. 
A) unemployment rates higher than what would occur if no policy had been pursued. 
B) inflation higher than what would occur if no policy had been pursued. 
C) real GDP lower than what would occur if no policy had been pursued. 
D) short-term interest rates higher than what would occur if no policy had been pursued.

Question 17

The Fed can simultaneously reduce the inflation rate and stimulate growth through lowering interest rates.

Accepted Answer

A) True 
 B)False

Question 18

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP equals potential GDP,then the federal funds target rate equals the

Accepted Answer

A) current discount rate. 
B) current inflation rate. 
C) real equilibrium federal funds rate. 
D) current inflation rate plus the real equilibrium federal funds rate. 
A) current discount rate. 
B) current inflation rate. 
C) real equilibrium federal funds rate. 
D) current inflation rate plus the real equilibrium federal funds rate.

Question 19

Since 2000,the Fed uses ________ to measure inflation.

Accepted Answer

A) the index of leading economic indicators 
B) the personal consumption expenditures index 
C) the consumer price index 
D) the GDP deflator 
E) the producer price index 
A) the index of leading economic indicators 
B) the personal consumption expenditures index 
C) the consumer price index 
D) the GDP deflator 
E) the producer price index

Question 20

Changes in the federal funds rate usually result in

Accepted Answer

A) changes in both short-term and long-term interest rates with more of an effect on short-term interest rates. 
B) changes in both short-term and long-term interest rates with more of an effect on long-term interest rates. 
C) changes in both short-term and long-term interest rates with equal effect on both. 
D) no change in both short-term and long-term interest rates. 
A) changes in both short-term and long-term interest rates with more of an effect on short-term interest rates. 
B) changes in both short-term and long-term interest rates with more of an effect on long-term interest rates. 
C) changes in both short-term and long-term interest rates with equal effect on both. 
D) no change in both short-term and long-term interest rates.

Using the money demand and money supply model,an open market purchase of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to

Expansionary monetary policy refers to the ________ to increase real GDP.

Table 17-1 -Refer to Table 17-1.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2015 if the Fed does not use monetary policy.Which of the following policies makes sense if the Fed wants to keep real GDP at its potential level in 2015?

An increase in the interest rate causes

The relationship between GDP and the money supply has gotten stronger since the 1980s.

Figure 17-6 -Refer to Figure 17-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,the Federal Reserve would most likely

Most of the pressure for a monetary growth rule has disappeared because since 1980,

Using the money demand and money supply model,an increase in money demand would cause the equilibrium interest rate to

Which of the following would cause the money demand curve to shift to the left?

When the Federal Reserve increases the money supply,at the previous equilibrium interest rate households and firms will now have

List the Fed's four main monetary goals.

The Federal Reserve can directly affect its monetary policy ,which then affect its monetary policy .

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is less than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

Most economists believe that the best monetary policy target is

Figure 17-6 -Refer to Figure 17-6.In the dynamic model of AD-AS in the figure above,the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues policy.This will result in

The Fed can simultaneously reduce the inflation rate and stimulate growth through lowering interest rates.

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP equals potential GDP,then the federal funds target rate equals the

Since 2000,the Fed uses ________ to measure inflation.

Changes in the federal funds rate usually result in

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

Exam 17: Monetary Policy

Using the money demand and money supply model,an open market purchase of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to

Expansionary monetary policy refers to the ________ to increase real GDP.

Table 17-1 -Refer to Table 17-1.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2015 if the Fed does not use monetary policy.Which of the following policies makes sense if the Fed wants to keep real GDP at its potential level in 2015?

An increase in the interest rate causes

The relationship between GDP and the money supply has gotten stronger since the 1980s.

Figure 17-6 -Refer to Figure 17-6.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,the Federal Reserve would most likely

Most of the pressure for a monetary growth rule has disappeared because since 1980,

Using the money demand and money supply model,an increase in money demand would cause the equilibrium interest rate to

Which of the following would cause the money demand curve to shift to the left?

When the Federal Reserve increases the money supply,at the previous equilibrium interest rate households and firms will now have

List the Fed's four main monetary goals.

The Federal Reserve can directly affect its monetary policy ________,which then affect its monetary policy ________.

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is less than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

Most economists believe that the best monetary policy target is

Figure 17-6 -Refer to Figure 17-6.In the dynamic model of AD-AS in the figure above,the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues policy.This will result in

The Fed can simultaneously reduce the inflation rate and stimulate growth through lowering interest rates.

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP equals potential GDP,then the federal funds target rate equals the

Since 2000,the Fed uses ________ to measure inflation.

Changes in the federal funds rate usually result in

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

The Federal Reserve can directly affect its monetary policy ,which then affect its monetary policy .