Question 1

If the Fed pursues expansionary monetary policy then

Accepted Answer

A) the money supply will decrease,interest rates will rise and GDP will fall. 
B) the money supply will decrease,interest rates will fall and GDP will fall. 
C) the money supply will increase,interest rates will rise and GDP will rise. 
D) the money supply will increase,interest rates will fall and GDP will rise. 
A) the money supply will decrease,interest rates will rise and GDP will fall. 
B) the money supply will decrease,interest rates will fall and GDP will fall. 
C) the money supply will increase,interest rates will rise and GDP will rise. 
D) the money supply will increase,interest rates will fall and GDP will rise.

Question 2

An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE

Accepted Answer

A) includes the prices of more consumer goods and services. 
B) includes the prices of consumer goods,but not consumer services. 
C) includes the prices of consumer services,but not consumer goods. 
D) is a fixed market-basket price index that does not allow the mix of products to change each year. 
A) includes the prices of more consumer goods and services. 
B) includes the prices of consumer goods,but not consumer services. 
C) includes the prices of consumer services,but not consumer goods. 
D) is a fixed market-basket price index that does not allow the mix of products to change each year.

Question 3

The leader of the monetarist school and major proponent of a monetary growth rule was

Accepted Answer

A) Ben Bernanke. 
B) Milton Friedman. 
C) Alan Greenspan. 
D) Paul Volcker. 
A) Ben Bernanke. 
B) Milton Friedman. 
C) Alan Greenspan. 
D) Paul Volcker.

Question 4

From an initial long-run macroeconomic equilibrium,if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply,then the Federal Reserve would most likely

Accepted Answer

A) increase income tax rates. 
B) decrease income tax rates. 
C) increase interest rates. 
D) decrease interest rates. 
A) increase income tax rates. 
B) decrease income tax rates. 
C) increase interest rates. 
D) decrease interest rates.

Question 5

If the amount you owe on your house is less than the price of the house,you have

Accepted Answer

A) positive equity in your house. 
B) an adjustable-rate mortgage on your house. 
C) negative equity in your house. 
D) a reverse mortgage on your house. 
A) positive equity in your house. 
B) an adjustable-rate mortgage on your house. 
C) negative equity in your house. 
D) a reverse mortgage on your house.

Question 6

Suppose the equilibrium real federal funds rate is 5 percent,the target rate of inflation is 3 percent,the current inflation rate is 5 percent,and real GDP is 4 percent above potential real GDP.If the weights for the inflation gap and the output gap are both 1/2,then according to the Taylor rule the federal funds target rate equals

Accepted Answer

A) 1 percent. 
B) 9 percent. 
C) 13 percent. 
D) 17 percent. 
A) 1 percent. 
B) 9 percent. 
C) 13 percent. 
D) 17 percent.

Question 7

The consumer price index (CPI),the personal consumption expenditures price index (PCE),and the core PCE have over the last 15 years

Accepted Answer

A) moved roughly together with the CPI being the most stable. 
B) moved roughly together with the PCE being the most stable. 
C) moved roughly together with the core PCE being the most stable. 
D) not moved together,with the CPI being the most stable. 
A) moved roughly together with the CPI being the most stable. 
B) moved roughly together with the PCE being the most stable. 
C) moved roughly together with the core PCE being the most stable. 
D) not moved together,with the CPI being the most stable.

Question 8

Rising prices erode the value of money as a ________ and as a ________.

Accepted Answer

A) unit of barter;unit of account 
B) store of value;unit of liquidity 
C) medium of exchange;store of value 
D) store of value;unit of barter 
A) unit of barter;unit of account 
B) store of value;unit of liquidity 
C) medium of exchange;store of value 
D) store of value;unit of barter

Question 9

Monetary policy is conducted by the U.S.Treasury Department.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the Article Summary.Implementing a negative interest rate policy,as was advocated by the president of the Federal Reserve Bank of Minneapolis,would be an example of ________ monetary policy designed to ________ aggregate demand.

Accepted Answer

A) expansionary;increase 
B) expansionary;decrease 
C) contractionary;increase 
D) contractionary;decrease 
A) expansionary;increase 
B) expansionary;decrease 
C) contractionary;increase 
D) contractionary;decrease

Question 11

Suppose that the economy is producing above potential GDP and the Fed implements the correct change in monetary policy,but not until after the economy has passed the peak of the boom.Then

Accepted Answer

A) the Fed's contractionary policy will result in too large of a decrease in GDP. 
B) the Fed's contractionary policy will result in too small of a decrease in GDP. 
C) the Fed's expansionary policy will result in too small of a decrease in GDP. 
D) the Fed's expansionary policy will result in too large of an increase in GDP. 
A) the Fed's contractionary policy will result in too large of a decrease in GDP. 
B) the Fed's contractionary policy will result in too small of a decrease in GDP. 
C) the Fed's expansionary policy will result in too small of a decrease in GDP. 
D) the Fed's expansionary policy will result in too large of an increase in GDP.

Question 12

The money supply curve is vertical if

Accepted Answer

A) banks and the Fed jointly determine the money supply. 
B) the Fed is able to completely determine the money supply. 
C) banks and households determine the money supply. 
D) households and the Fed jointly determine the money supply. 
A) banks and the Fed jointly determine the money supply. 
B) the Fed is able to completely determine the money supply. 
C) banks and households determine the money supply. 
D) households and the Fed jointly determine the money supply.

Question 13

Buying a house during a recession may be a good idea if your job seems secure because the Federal Reserve often lowers interest rates during a recession.

Accepted Answer

A) True 
 B)False

Question 14

Figure 15-5  
-Refer to Figure 15-5.In the figure above,the movement from point A to point B in the money market would be caused by

Accepted Answer

A) an increase in the price level. 
B) a decrease in real GDP. 
C) an open market sale of Treasury securities by the Federal Reserve. 
D) an increase in the required reserve ratio by the Federal Reserve. 
A) an increase in the price level. 
B) a decrease in real GDP. 
C) an open market sale of Treasury securities by the Federal Reserve. 
D) an increase in the required reserve ratio by the Federal Reserve.

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

The Fed

Accepted Answer

A) always engages in countercyclical policy. 
B) always intends to engage in procyclical policy. 
C) can engage in procyclical policy if it mistimes its policy response. 
D) never intends to engage in countercyclical policy. 
A) always engages in countercyclical policy. 
B) always intends to engage in procyclical policy. 
C) can engage in procyclical policy if it mistimes its policy response. 
D) never intends to engage in countercyclical policy.

Question 17

What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?

Accepted Answer

If the Fed believes the economy is about

Question 18

In the countries that have adopted inflation targeting,the inflation rate has typically

Accepted Answer

A) increased. 
B) decreased. 
C) decreased to zero. 
D) not changed. 
A) increased. 
B) decreased. 
C) decreased to zero. 
D) not changed.

Question 19

By the 2000s,an important market change occurred when investment banks became significant participants in the secondary market for

Accepted Answer

A) mortgages. 
B) Treasury securities. 
C) corporate bonds. 
D) currency. 
A) mortgages. 
B) Treasury securities. 
C) corporate bonds. 
D) currency.

Question 20

The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing.

Accepted Answer

A) True 
 B)False

If the Fed pursues expansionary monetary policy then

An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE

The leader of the monetarist school and major proponent of a monetary growth rule was

From an initial long-run macroeconomic equilibrium,if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply,then the Federal Reserve would most likely

If the amount you owe on your house is less than the price of the house,you have

The consumer price index (CPI),the personal consumption expenditures price index (PCE),and the core PCE have over the last 15 years

Rising prices erode the value of money as a and as a .

Monetary policy is conducted by the U.S.Treasury Department.

Refer to the Article Summary.Implementing a negative interest rate policy,as was advocated by the president of the Federal Reserve Bank of Minneapolis,would be an example of monetary policy designed to aggregate demand.

Suppose that the economy is producing above potential GDP and the Fed implements the correct change in monetary policy,but not until after the economy has passed the peak of the boom.Then

The money supply curve is vertical if

Buying a house during a recession may be a good idea if your job seems secure because the Federal Reserve often lowers interest rates during a recession.

Figure 15-5 -Refer to Figure 15-5.In the figure above,the movement from point A to point B in the money market would be caused by

Most economists believe that the best monetary policy target is

The Fed

What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?

In the countries that have adopted inflation targeting,the inflation rate has typically

By the 2000s,an important market change occurred when investment banks became significant participants in the secondary market for

The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing.

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

If the Fed pursues expansionary monetary policy then

An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE

The leader of the monetarist school and major proponent of a monetary growth rule was

From an initial long-run macroeconomic equilibrium,if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply,then the Federal Reserve would most likely

If the amount you owe on your house is less than the price of the house,you have

The consumer price index (CPI),the personal consumption expenditures price index (PCE),and the core PCE have over the last 15 years

Rising prices erode the value of money as a ________ and as a ________.

Monetary policy is conducted by the U.S.Treasury Department.

Refer to the Article Summary.Implementing a negative interest rate policy,as was advocated by the president of the Federal Reserve Bank of Minneapolis,would be an example of ________ monetary policy designed to ________ aggregate demand.

Suppose that the economy is producing above potential GDP and the Fed implements the correct change in monetary policy,but not until after the economy has passed the peak of the boom.Then

The money supply curve is vertical if

Buying a house during a recession may be a good idea if your job seems secure because the Federal Reserve often lowers interest rates during a recession.

Figure 15-5 -Refer to Figure 15-5.In the figure above,the movement from point A to point B in the money market would be caused by

Most economists believe that the best monetary policy target is

The Fed

What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?

In the countries that have adopted inflation targeting,the inflation rate has typically

By the 2000s,an important market change occurred when investment banks became significant participants in the secondary market for

The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing.

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

Rising prices erode the value of money as a and as a .

Refer to the Article Summary.Implementing a negative interest rate policy,as was advocated by the president of the Federal Reserve Bank of Minneapolis,would be an example of monetary policy designed to aggregate demand.