Question 1

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 2

The federal funds rate is

Accepted Answer

A) the interest rate the Fed charges commercial banks. 
B) the interest rate a bank charges its best customers. 
C) the interest rate banks charge each other for overnight loans. 
D) the interest rate on a Treasury Bill. 
A) the interest rate the Fed charges commercial banks. 
B) the interest rate a bank charges its best customers. 
C) the interest rate banks charge each other for overnight loans. 
D) the interest rate on a Treasury Bill.

Question 3

Figure 15-12  
-Refer to Figure 15-12.In the dynamic AD-AS model,if 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 no policy,then at point B

Accepted Answer

A) firms are producing above capacity. 
B) there is pressure on wages and prices to fall. 
C) the unemployment rate is greater than the natural rate of unemployment. 
D) incomes and profits are falling. 
A) firms are producing above capacity. 
B) there is pressure on wages and prices to fall. 
C) the unemployment rate is greater than the natural rate of unemployment. 
D) incomes and profits are falling.

Question 4

Table 15-4
  
-Refer to Table 15-4.Suppose the following table 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.If the Fed wants to keep real GDP at its potential level in 2017,should the Fed use a contractionary or expansionary policy? How should it conduct open market operations to achieve its goal?

Accepted Answer

The information in the table indicates t

Question 5

By the 2000s,investment banks had become significant participants in the secondary market for mortgages.

Accepted Answer

A) True 
 B)False

Question 6

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater 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 7

The monetary policy target the Federal Reserve focuses primarily on today is

Accepted Answer

A) the unemployment rate. 
B) M1. 
C) the inflation rate. 
D) the interest rate. 
E) M2. 
A) the unemployment rate. 
B) M1. 
C) the inflation rate. 
D) the interest rate. 
E) M2.

Question 8

The core personal consumption expenditures price index excludes

Accepted Answer

A) food and energy prices. 
B) food and housing prices. 
C) energy and housing prices. 
D) housing and health care prices. 
A) food and energy prices. 
B) food and housing prices. 
C) energy and housing prices. 
D) housing and health care prices.

Question 9

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 10

In which of the following situations would the Fed conduct contractionary monetary policy?

Accepted Answer

A) The Fed believes that aggregate demand was growing too slowly to keep up with potential GDP. 
B) The Fed fears that unemployment is climbing above the natural rate. 
C) The Fed is concerned that aggregate demand would continue to exceed the growth in potential GDP. 
D) The Fed is worried that deflation will become a problem. 
A) The Fed believes that aggregate demand was growing too slowly to keep up with potential GDP. 
B) The Fed fears that unemployment is climbing above the natural rate. 
C) The Fed is concerned that aggregate demand would continue to exceed the growth in potential GDP. 
D) The Fed is worried that deflation will become a problem.

Question 11

Your income will increase if the Federal Reserve buys a Treasury bill from you and pays you with a check from the Fed.

Accepted Answer

A) True 
 B)False

Question 12

An increase in the demand for Treasury bills will

Accepted Answer

A) decrease the price of Treasury bills. 
B) decrease 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) decrease the price of Treasury bills. 
B) decrease 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 13

A monetary policy target is a variable that the Fed can affect directly,which then affects one or more of the Fed's policy goals.

Accepted Answer

A) True 
 B)False

Question 14

In 2008,the Treasury and Federal Reserve took several actions in response to the deepening financial crisis.One action was the creation of the Term Securities Lending Facility,under which the Fed will loan up to $200 billion of treasury securities in exchange for

Accepted Answer

A) stock. 
B) mortgage-backed securities. 
C) corporate bonds. 
D) required bank reserves. 
A) stock. 
B) mortgage-backed securities. 
C) corporate bonds. 
D) required bank reserves.

Question 15

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 16

The goals of monetary policy tend to be interrelated.For example,when the Fed pursues the goal of ________,it also can achieve the goal of ________ simultaneously.

Accepted Answer

A) high employment;economic growth 
B) high employment;lowering government spending 
C) economic growth;a low current account deficit 
D) stability of financial markets;a low current account deficit 
A) high employment;economic growth 
B) high employment;lowering government spending 
C) economic growth;a low current account deficit 
D) stability of financial markets;a low current account deficit

Question 17

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 designed to ________ the price level and ________ real GDP.

Accepted Answer

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

Question 18

A monetary policy target is a variable that

Accepted Answer

A) the Fed can affect directly. 
B) equals one of the Fed's main policy goals. 
C) the Fed has no ability to change. 
D) the Fed cannot affect directly. 
A) the Fed can affect directly. 
B) equals one of the Fed's main policy goals. 
C) the Fed has no ability to change. 
D) the Fed cannot affect directly.

Question 19

Figure 15-13  
-Refer to Figure 15-13.In the figure above,if the economy in Year 1 is at point A and is expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to

Accepted Answer

A) lower interest rates. 
B) raise interest rates. 
C) lower income taxes. 
D) raise income taxes. 
A) lower interest rates. 
B) raise interest rates. 
C) lower income taxes. 
D) raise income taxes.

Question 20

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.

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

The federal funds rate is

Figure 15-12 -Refer to Figure 15-12.In the dynamic AD-AS model,if 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 no policy,then at point B

By the 2000s,investment banks had become significant participants in the secondary market for mortgages.

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

The monetary policy target the Federal Reserve focuses primarily on today is

The core personal consumption expenditures price index excludes

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

In which of the following situations would the Fed conduct contractionary monetary policy?

Your income will increase if the Federal Reserve buys a Treasury bill from you and pays you with a check from the Fed.

An increase in the demand for Treasury bills will

A monetary policy target is a variable that the Fed can affect directly,which then affects one or more of the Fed's policy goals.

In 2008,the Treasury and Federal Reserve took several actions in response to the deepening financial crisis.One action was the creation of the Term Securities Lending Facility,under which the Fed will loan up to $200 billion of treasury securities in exchange for

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

The goals of monetary policy tend to be interrelated.For example,when the Fed pursues the goal of ,it also can achieve the goal of simultaneously.

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 designed to the price level and real GDP.

A monetary policy target is a variable that

Figure 15-13 -Refer to Figure 15-13.In the figure above,if the economy in Year 1 is at point A and is expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to

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

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

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

The federal funds rate is

Figure 15-12 -Refer to Figure 15-12.In the dynamic AD-AS model,if 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 no policy,then at point B

By the 2000s,investment banks had become significant participants in the secondary market for mortgages.

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

The monetary policy target the Federal Reserve focuses primarily on today is

The core personal consumption expenditures price index excludes

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

In which of the following situations would the Fed conduct contractionary monetary policy?

Your income will increase if the Federal Reserve buys a Treasury bill from you and pays you with a check from the Fed.

An increase in the demand for Treasury bills will

A monetary policy target is a variable that the Fed can affect directly,which then affects one or more of the Fed's policy goals.

In 2008,the Treasury and Federal Reserve took several actions in response to the deepening financial crisis.One action was the creation of the Term Securities Lending Facility,under which the Fed will loan up to $200 billion of treasury securities in exchange for

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

The goals of monetary policy tend to be interrelated.For example,when the Fed pursues the goal of ________,it also can achieve the goal of ________ simultaneously.

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 designed to ________ the price level and ________ real GDP.

A monetary policy target is a variable that

Figure 15-13 -Refer to Figure 15-13.In the figure above,if the economy in Year 1 is at point A and is expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to

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

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 goals of monetary policy tend to be interrelated.For example,when the Fed pursues the goal of ,it also can achieve the goal of simultaneously.

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 designed to the price level and real GDP.