Question 1

The Fed uses a "core" price index,one that excludes food and energy prices to measure inflation.It does so because

Accepted Answer

A) food and energy have inelastic demand curves and consumers will buy them regardless of their price. 
B) it wants to avoid the blame for high gasoline prices causing inflation. 
C) food and energy prices have wide swings that are not related to the causes of general inflation. 
D) food and energy prices do not change all that much during the short run,so are irrelevant to the calculation of inflation. 
A) food and energy have inelastic demand curves and consumers will buy them regardless of their price. 
B) it wants to avoid the blame for high gasoline prices causing inflation. 
C) food and energy prices have wide swings that are not related to the causes of general inflation. 
D) food and energy prices do not change all that much during the short run,so are irrelevant to the calculation of inflation.

Question 2

Figure 15-9  
-Refer to Figure 15-9.In the figure above suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?

Accepted Answer

A) a decrease in income taxes 
B) an increase in the required reserve ratio 
C) an open market purchase of Treasury bills 
D) an open market sale of Treasury bills 
A) a decrease in income taxes 
B) an increase in the required reserve ratio 
C) an open market purchase of Treasury bills 
D) an open market sale of Treasury bills

Question 3

An increase in the domestic interest rate relative to other interest rates should

Accepted Answer

A) increase investment spending. 
B) decrease consumption spending. 
C) increase government spending. 
D) increase net exports. 
A) increase investment spending. 
B) decrease consumption spending. 
C) increase government spending. 
D) increase net exports.

Question 4

Use the money demand and money supply model to show graphically and explain the effect on interest rates of the Federal Reserve's open market sale of Treasury securities.

Accepted Answer

An open market sale of Treasur

Question 5

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

Accepted Answer

A) short-term real interest rates;long-term nominal interest rates 
B) short-term nominal interest rates;long-term nominal interest rates 
C) short-term real interest rates;long-term real interest rates 
D) short-term nominal interest rates;long-term real interest rates 
A) short-term real interest rates;long-term nominal interest rates 
B) short-term nominal interest rates;long-term nominal interest rates 
C) short-term real interest rates;long-term real interest rates 
D) short-term nominal interest rates;long-term real interest rates

Question 6

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 7

Table 15-5
  
-Refer to Table 15-5.Suppose the table above illustrates the values of real and potential GDP and the price level if the Fed does not vote to change their current policy to be more contractionary or expansionary.Suppose that the Fed uses an appropriate policy and is successful in keeping real GDP at potential in 2017.State whether each of the following will be higher or lower than if the Fed had taken no action:
a.Real GDP
b.Potential real GDP
c.The price level
d.The unemployment rate

Accepted Answer

If the Fed's policy was successful,real

Question 8

In 2015,some banks in Europe had to make interest payments to borrowers rather than receive interest payments from borrowers.Which of the following statements describes this situation?

Accepted Answer

A) For these banks,the loans increased required reserves. 
B) These banks were receiving negative nominal interest rates on these loans. 
C) For these banks,the loans were liabilities instead of assets. 
D) All of the above are correct. 
A) For these banks,the loans increased required reserves. 
B) These banks were receiving negative nominal interest rates on these loans. 
C) For these banks,the loans were liabilities instead of assets. 
D) All of the above are correct.

Question 9

Give an example of a monetary policy target.Explain why the Fed uses policy targets.

Accepted Answer

One possible monetary target is the mone

Question 10

Why doesn't the Fed have both a money supply target and an interest rate target?

Accepted Answer

A) Short-term interest rates do not respond to changes in the money supply,which the Fed can control. 
B) The Fed does not control money demand. 
C) The Fed cannot offset the impact of changes in cash management by the public or changes in lending policies of commercial banks on the money supply. 
D) Only the level of interest rates matters when we consider rates of growth in real GDP,employment,and rates of price inflation. 
A) Short-term interest rates do not respond to changes in the money supply,which the Fed can control. 
B) The Fed does not control money demand. 
C) The Fed cannot offset the impact of changes in cash management by the public or changes in lending policies of commercial banks on the money supply. 
D) Only the level of interest rates matters when we consider rates of growth in real GDP,employment,and rates of price inflation.

Question 11

With the Troubled Asset Relief Program (TARP),the Treasury provided funds to banks in exchange for stock.

Accepted Answer

A) True 
 B)False

Question 12

If the Fed buys Treasury bills,this will shift the

Accepted Answer

A) money supply curve to the right. 
B) money supply curve to the left. 
C) money demand curve to the right. 
D) money demand curve to the left. 
A) money supply curve to the right. 
B) money supply curve to the left. 
C) money demand curve to the right. 
D) money demand curve to the left.

Question 13

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 14

Which of the following would most likely induce the Federal Reserve to conduct expansionary monetary policy? A significant decrease in

Accepted Answer

A) oil prices. 
B) business taxes. 
C) income tax rates. 
D) investment spending. 
A) oil prices. 
B) business taxes. 
C) income tax rates. 
D) investment spending.

Question 15

Which of the following characterizes the Fed's ability to prevent recessions?

Accepted Answer

A) The Fed is able to "fine tune" the economy and entirely eliminate recessions. 
B) The Fed is incapable of changing aggregate demand through its monetary policy tools. 
C) The Fed is able to keep a recession shorter and milder than it would otherwise be. 
D) The Fed is able to eliminate the business cycle and achieve absolute price stability. 
A) The Fed is able to "fine tune" the economy and entirely eliminate recessions. 
B) The Fed is incapable of changing aggregate demand through its monetary policy tools. 
C) The Fed is able to keep a recession shorter and milder than it would otherwise be. 
D) The Fed is able to eliminate the business cycle and achieve absolute price stability.

Question 16

Which of the following is true?

Accepted Answer

A) The money market model is essentially a model that determines the short-term nominal rate of interest. 
B) The money market model is essentially a model that determines the short-term real rate of interest. 
C) The loanable funds model is essentially a model that determines the short-term real rate of interest. 
D) The loanable funds model is essentially a model that determines the long-term nominal rate of interest. 
A) The money market model is essentially a model that determines the short-term nominal rate of interest. 
B) The money market model is essentially a model that determines the short-term real rate of interest. 
C) The loanable funds model is essentially a model that determines the short-term real rate of interest. 
D) The loanable funds model is essentially a model that determines the long-term nominal rate of interest.

Question 17

While many analysts defended the actions taken by the Fed and the Treasury to respond to the financial crisis in 2008,others were critical of these actions.The critics were concerned that by not allowing large firms to fail,

Accepted Answer

A) smaller firms will resent not receiving similar assistance. 
B) stockholders and bondholders of these firms were not allowed to receive the proceeds from the sale of assets that would have occurred if the firms had declared bankruptcy. 
C) there is an increased likelihood that other firms will engage in risky behavior in the future with the expectation that they will also not be allowed to fail. 
D) there will be less competition in the U.S.economy,which could led to higher prices for consumers. 
A) smaller firms will resent not receiving similar assistance. 
B) stockholders and bondholders of these firms were not allowed to receive the proceeds from the sale of assets that would have occurred if the firms had declared bankruptcy. 
C) there is an increased likelihood that other firms will engage in risky behavior in the future with the expectation that they will also not be allowed to fail. 
D) there will be less competition in the U.S.economy,which could led to higher prices for consumers.

Question 18

An increase in the interest rate

Accepted Answer

A) decreases the opportunity cost of holding money. 
B) increases the opportunity cost of holding money. 
C) decreases the percentage yield of holding money. 
D) increases the percentage yield of holding money. 
A) decreases the opportunity cost of holding money. 
B) increases the opportunity cost of holding money. 
C) decreases the percentage yield of holding money. 
D) increases the percentage yield of holding money.

Question 19

When the Fed embarked on a policy known as quantitative easing,they

Accepted Answer

A) slowly lowered the federal funds rate target until it was equal to zero. 
B) reduced the required reserve ratio by one-quarter point per month for 12 months. 
C) bought longer-term securities than are usually bought in open market operations. 
D) opened up lending to primary dealers,commercial banks,and investment banks. 
A) slowly lowered the federal funds rate target until it was equal to zero. 
B) reduced the required reserve ratio by one-quarter point per month for 12 months. 
C) bought longer-term securities than are usually bought in open market operations. 
D) opened up lending to primary dealers,commercial banks,and investment banks.

Question 20

Increases in the price level

Accepted Answer

A) increase the opportunity cost of holding money. 
B) decrease the opportunity cost of holding money. 
C) increase the quantity of money needed for buying and selling. 
D) decrease the quantity of money needed for buying and selling. 
A) increase the opportunity cost of holding money. 
B) decrease the opportunity cost of holding money. 
C) increase the quantity of money needed for buying and selling. 
D) decrease the quantity of money needed for buying and selling.

The Fed uses a "core" price index,one that excludes food and energy prices to measure inflation.It does so because

Figure 15-9 -Refer to Figure 15-9.In the figure above suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?

An increase in the domestic interest rate relative to other interest rates should

Use the money demand and money supply model to show graphically and explain the effect on interest rates of the Federal Reserve's open market sale of Treasury securities.

The money market model is concerned with and the loanable funds market model is concerned with .

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

In 2015,some banks in Europe had to make interest payments to borrowers rather than receive interest payments from borrowers.Which of the following statements describes this situation?

Give an example of a monetary policy target.Explain why the Fed uses policy targets.

Why doesn't the Fed have both a money supply target and an interest rate target?

With the Troubled Asset Relief Program (TARP),the Treasury provided funds to banks in exchange for stock.

If the Fed buys Treasury bills,this will shift the

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.

Which of the following would most likely induce the Federal Reserve to conduct expansionary monetary policy? A significant decrease in

Which of the following characterizes the Fed's ability to prevent recessions?

Which of the following is true?

While many analysts defended the actions taken by the Fed and the Treasury to respond to the financial crisis in 2008,others were critical of these actions.The critics were concerned that by not allowing large firms to fail,

An increase in the interest rate

When the Fed embarked on a policy known as quantitative easing,they

Increases in the price level

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 Fed uses a "core" price index,one that excludes food and energy prices to measure inflation.It does so because

Figure 15-9 -Refer to Figure 15-9.In the figure above suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?

An increase in the domestic interest rate relative to other interest rates should

Use the money demand and money supply model to show graphically and explain the effect on interest rates of the Federal Reserve's open market sale of Treasury securities.

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

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

In 2015,some banks in Europe had to make interest payments to borrowers rather than receive interest payments from borrowers.Which of the following statements describes this situation?

Give an example of a monetary policy target.Explain why the Fed uses policy targets.

Why doesn't the Fed have both a money supply target and an interest rate target?

With the Troubled Asset Relief Program (TARP),the Treasury provided funds to banks in exchange for stock.

If the Fed buys Treasury bills,this will shift the

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.

Which of the following would most likely induce the Federal Reserve to conduct expansionary monetary policy? A significant decrease in

Which of the following characterizes the Fed's ability to prevent recessions?

Which of the following is true?

While many analysts defended the actions taken by the Fed and the Treasury to respond to the financial crisis in 2008,others were critical of these actions.The critics were concerned that by not allowing large firms to fail,

An increase in the interest rate

When the Fed embarked on a policy known as quantitative easing,they

Increases in the price level

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 money market model is concerned with and the loanable funds market model is concerned with .