Question 1

The Taylor rule helps explain the relationship between the Fed's ________ and ________.

Accepted Answer

A) money supply target;economic conditions 
B) money supply target;the federal funds target 
C) federal funds target;the monetary growth rule 
D) federal funds target;economic conditions 
A) money supply target;economic conditions 
B) money supply target;the federal funds target 
C) federal funds target;the monetary growth rule 
D) federal funds target;economic conditions

Question 2

The situation in which short-term interest rates are pushed to zero,leaving the central bank unable to lower them further is known as

Accepted Answer

A) the Taylor rule. 
B) a liquidity trap. 
C) a zero-sum game. 
D) an interest rate panic. 
A) the Taylor rule. 
B) a liquidity trap. 
C) a zero-sum game. 
D) an interest rate panic.

Question 3

Inflation rates during the years 1979-1981 were the highest the United States has ever experienced during peacetime.

Accepted Answer

A) True 
 B)False

Question 4

The Fed can directly lower the inflation rate.

Accepted Answer

A) True 
 B)False

Question 5

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 6

When housing prices ________ as they did beginning in 2006 following the housing market bubble,most banks and other lenders tightened the requirement for borrowers,making it ________ for potential home buyers to obtain mortgages.

Accepted Answer

A) fell;easier 
B) fell;harder 
C) rose;easier 
D) rose;harder 
A) fell;easier 
B) fell;harder 
C) rose;easier 
D) rose;harder

Question 7

In 2008,the Treasury and Federal Reserve took several actions in response to the deepening financial crisis.One action was the Treasury's move to have the federal government take control of

Accepted Answer

A) the Federal Deposit Insurance Corporation (FDI
C) . 
B) Fannie Mae and Freddie Mac. 
C) JPMorgan Chase. 
D) Lehman Brothers. 
A) the Federal Deposit Insurance Corporation (FDI
C) . 
B) Fannie Mae and Freddie Mac. 
C) JPMorgan Chase. 
D) Lehman Brothers.

Question 8

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 9

Table 15-1
  
-Refer to Table 15-1.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2017 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 2017?

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 10

Figure 15-12  
-Refer to Figure 15-12.In the dynamic AD-AS model,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 rates higher than what would occur if no policy had been pursued. 
C) potential real GDP levels lower than what would occur if no policy had been pursued. 
D) real GDP levels 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 rates higher than what would occur if no policy had been pursued. 
C) potential real GDP levels lower than what would occur if no policy had been pursued. 
D) real GDP levels higher than what would occur if no policy had been pursued.

Question 11

Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP.

Accepted Answer

A) True 
 B)False

Question 12

The Federal Reserve does not target both the money supply and an interest rate because

Accepted Answer

A) it would be too confusing to Wall Street and would disrupt the financial markets. 
B) it would be too easy for Wall Street to determine what policy the Fed is following and this would destabilize the economy. 
C) it would be illegal according to the Federal Reserve Act. 
D) the Fed cannot achieve a target for both the money supply and an interest rate at the same time. 
A) it would be too confusing to Wall Street and would disrupt the financial markets. 
B) it would be too easy for Wall Street to determine what policy the Fed is following and this would destabilize the economy. 
C) it would be illegal according to the Federal Reserve Act. 
D) the Fed cannot achieve a target for both the money supply and an interest rate at the same time.

Question 13

The Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is one of the ways the Fed responded?

Accepted Answer

A) The Fed banned investment banks from obtaining 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 Citibank to acquire General Motors and Chrysler. 
A) The Fed banned investment banks from obtaining 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 Citibank to acquire General Motors and Chrysler.

Question 14

Does the money demand curve have a positive slope or a negative slope? Why does it have this slope? Explain why an increase in the variable on the vertical axis of the money demand curve causes either an increase or a decrease in the variable on the horizontal axis of the money demand curve.

Accepted Answer

The money demand curve has a negative sl

Question 15

Despite saving Lehman Brothers from failing,the Fed and the Treasury decided to allow Bear Stearns to go bankrupt,which it did in September,2008.

Accepted Answer

A) True 
 B)False

Question 16

In the following table,fill in the columns for your return on investment if the price of your house increased or decreased by 20 percent,based on the down payments specified in the first column.
Return on Your Investment From

Accepted Answer

Return on

Question 17

Expansionary monetary policy enacted during a recession will cause the inflation rate to increase.

Accepted Answer

A) True 
 B)False

Question 18

The ability of the Federal Reserve to use monetary policy to affect economic variables such as real GDP ultimately depends upon its ability to affect

Accepted Answer

A) tax rates. 
B) real interest rates. 
C) nominal interest rates. 
D) foreign exchange rates. 
A) tax rates. 
B) real interest rates. 
C) nominal interest rates. 
D) foreign exchange rates.

Question 19

Federal Reserve Board Chairmen Paul Volcker,Alan Greenspan,and Ben Bernanke all have focused on which of the following as their main goal of monetary policy?

Accepted Answer

A) high employment 
B) price stability 
C) economic growth 
D) stability of financial markets 
A) high employment 
B) price stability 
C) economic growth 
D) stability of financial markets

Question 20

Figure 15-4  
-Refer to Figure 15-4.In the figure above,a movement from point A to point B would be caused by

Accepted Answer

A) a decrease in real GDP. 
B) an increase in the price level. 
C) a decrease in the price level. 
D) an increase in the interest rate. 
A) a decrease in real GDP. 
B) an increase in the price level. 
C) a decrease in the price level. 
D) an increase in the interest rate.

The Taylor rule helps explain the relationship between the Fed's and .

The situation in which short-term interest rates are pushed to zero,leaving the central bank unable to lower them further is known as

Inflation rates during the years 1979-1981 were the highest the United States has ever experienced during peacetime.

The Fed can directly lower the inflation rate.

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?

When housing prices as they did beginning in 2006 following the housing market bubble,most banks and other lenders tightened the requirement for borrowers,making it for potential home buyers to obtain mortgages.

In 2008,the Treasury and Federal Reserve took several actions in response to the deepening financial crisis.One action was the Treasury's move to have the federal government take control of

The money demand curve has a

Table 15-1 -Refer to Table 15-1.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2017 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 2017?

Figure 15-12 -Refer to Figure 15-12.In the dynamic AD-AS model,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

Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP.

The Federal Reserve does not target both the money supply and an interest rate because

The Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is one of the ways the Fed responded?

Does the money demand curve have a positive slope or a negative slope? Why does it have this slope? Explain why an increase in the variable on the vertical axis of the money demand curve causes either an increase or a decrease in the variable on the horizontal axis of the money demand curve.

Despite saving Lehman Brothers from failing,the Fed and the Treasury decided to allow Bear Stearns to go bankrupt,which it did in September,2008.

In the following table,fill in the columns for your return on investment if the price of your house increased or decreased by 20 percent,based on the down payments specified in the first column. Return on Your Investment From

Expansionary monetary policy enacted during a recession will cause the inflation rate to increase.

The ability of the Federal Reserve to use monetary policy to affect economic variables such as real GDP ultimately depends upon its ability to affect

Federal Reserve Board Chairmen Paul Volcker,Alan Greenspan,and Ben Bernanke all have focused on which of the following as their main goal of monetary policy?

Figure 15-4 -Refer to Figure 15-4.In the figure above,a movement from point A to point B would be caused by

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Fiscal Policy

Inflation,unemployment,and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 15: Monetary Policy

The Taylor rule helps explain the relationship between the Fed's ________ and ________.

The situation in which short-term interest rates are pushed to zero,leaving the central bank unable to lower them further is known as

Inflation rates during the years 1979-1981 were the highest the United States has ever experienced during peacetime.

The Fed can directly lower the inflation rate.

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?

When housing prices ________ as they did beginning in 2006 following the housing market bubble,most banks and other lenders tightened the requirement for borrowers,making it ________ for potential home buyers to obtain mortgages.

In 2008,the Treasury and Federal Reserve took several actions in response to the deepening financial crisis.One action was the Treasury's move to have the federal government take control of

The money demand curve has a

Table 15-1 -Refer to Table 15-1.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2017 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 2017?

Figure 15-12 -Refer to Figure 15-12.In the dynamic AD-AS model,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

Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP.

The Federal Reserve does not target both the money supply and an interest rate because

The Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is one of the ways the Fed responded?

Does the money demand curve have a positive slope or a negative slope? Why does it have this slope? Explain why an increase in the variable on the vertical axis of the money demand curve causes either an increase or a decrease in the variable on the horizontal axis of the money demand curve.

Despite saving Lehman Brothers from failing,the Fed and the Treasury decided to allow Bear Stearns to go bankrupt,which it did in September,2008.

In the following table,fill in the columns for your return on investment if the price of your house increased or decreased by 20 percent,based on the down payments specified in the first column. Return on Your Investment From

Expansionary monetary policy enacted during a recession will cause the inflation rate to increase.

The ability of the Federal Reserve to use monetary policy to affect economic variables such as real GDP ultimately depends upon its ability to affect

Federal Reserve Board Chairmen Paul Volcker,Alan Greenspan,and Ben Bernanke all have focused on which of the following as their main goal of monetary policy?

Figure 15-4 -Refer to Figure 15-4.In the figure above,a movement from point A to point B would be caused by

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Fiscal Policy

Inflation,unemployment,and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The Taylor rule helps explain the relationship between the Fed's and .

When housing prices as they did beginning in 2006 following the housing market bubble,most banks and other lenders tightened the requirement for borrowers,making it for potential home buyers to obtain mortgages.