Question 1

In the bank lending channel, an expansionary monetary policy

Accepted Answer

A) will lead to a greater increase in output than in the money channel. 
B) will not affect the real interest rate. 
C) will result in increased spending only for firms and households dependent for credit on bank loans. 
D) will lead to a larger budget deficit than in the money channel. 
A) will lead to a greater increase in output than in the money channel. 
B) will not affect the real interest rate. 
C) will result in increased spending only for firms and households dependent for credit on bank loans. 
D) will lead to a larger budget deficit than in the money channel.

Question 2

In the bank lending channel, an important reason for output increases in the short run after an expansionary monetary policy is that

Accepted Answer

A) the funds directly available for households and firms to spend will increase. 
B) prices will increase, making increased production more profitable for firms. 
C) the increase in government spending from an expansionary monetary policy increases output through the multiplier effect. 
D) the ability of banks to make loans will increase. 
A) the funds directly available for households and firms to spend will increase. 
B) prices will increase, making increased production more profitable for firms. 
C) the increase in government spending from an expansionary monetary policy increases output through the multiplier effect. 
D) the ability of banks to make loans will increase.

Question 3

A general unwillingness of banks to lend

Accepted Answer

A) results in monetary policy being ineffectual in the bank lending channel. 
B) results in monetary policy being ineffectual in the balance sheet channel. 
C) results in monetary policy being ineffectual in the money channel. 
D) does not result in monetary being ineffectual in the bank lending, balance sheet, or money channels. 
A) results in monetary policy being ineffectual in the bank lending channel. 
B) results in monetary policy being ineffectual in the balance sheet channel. 
C) results in monetary policy being ineffectual in the money channel. 
D) does not result in monetary being ineffectual in the bank lending, balance sheet, or money channels.

Question 4

The new Keynesian view of the effect of monetary policy on output stresses the effects of monetary policy on

Accepted Answer

A) the net worth of borrowers. 
B) the willingness of banks to make loans. 
C) the ability of banks to make loans. 
D) interest rates. 
A) the net worth of borrowers. 
B) the willingness of banks to make loans. 
C) the ability of banks to make loans. 
D) interest rates.

Question 5

Increases in interest rates

Accepted Answer

A) reduce borrowers' net worth. 
B) reduce lenders' net worth. 
C) increase the present value of borrowers' assets. 
D) raise the cost to businesses of internal funding. 
A) reduce borrowers' net worth. 
B) reduce lenders' net worth. 
C) increase the present value of borrowers' assets. 
D) raise the cost to businesses of internal funding.

Question 6

Why did many economists suspect a credit crunch occurred in the fall of 1998?

Accepted Answer

A) Interest rates rose sharply. 
B) The U.S. economy entered a recession. 
C) Banks curtailed lending to risky borrowers. 
D) Investment spending declined dramatically. 
A) Interest rates rose sharply. 
B) The U.S. economy entered a recession. 
C) Banks curtailed lending to risky borrowers. 
D) Investment spending declined dramatically.

Question 7

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

Accepted Answer

A) since real rates are what affects borrowing and spending decisions. 
B) by improving borrower and bank balance sheets. 
C) by reducing transactions costs. 
D) only when the policy is substantial. 
A) since real rates are what affects borrowing and spending decisions. 
B) by improving borrower and bank balance sheets. 
C) by reducing transactions costs. 
D) only when the policy is substantial.

Question 8

Which of the following was NOT part of the program of credit controls imposed by the Fed in March 1980?

Accepted Answer

A) Banks were requested to reduce their acquisition of funds from nondeposit sources. 
B) A ceiling was placed on the interest rates paid on Treasury securities. 
C) A surcharge of 3% was placed on some discount borrowing by large banks. 
D) A special reserve requirement of 15% was placed on new money market mutual fund assets. 
A) Banks were requested to reduce their acquisition of funds from nondeposit sources. 
B) A ceiling was placed on the interest rates paid on Treasury securities. 
C) A surcharge of 3% was placed on some discount borrowing by large banks. 
D) A special reserve requirement of 15% was placed on new money market mutual fund assets.

In the bank lending channel, an expansionary monetary policy

In the bank lending channel, an important reason for output increases in the short run after an expansionary monetary policy is that

A general unwillingness of banks to lend

The new Keynesian view of the effect of monetary policy on output stresses the effects of monetary policy on

Increases in interest rates

Why did many economists suspect a credit crunch occurred in the fall of 1998?

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

Which of the following was NOT part of the program of credit controls imposed by the Fed in March 1980?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Inflation: Causes and Consequences

Filters

Exam 27: Information Problems and Channels for Monetary Policy

In the bank lending channel, an expansionary monetary policy

In the bank lending channel, an important reason for output increases in the short run after an expansionary monetary policy is that

A general unwillingness of banks to lend

The new Keynesian view of the effect of monetary policy on output stresses the effects of monetary policy on

Increases in interest rates

Why did many economists suspect a credit crunch occurred in the fall of 1998?

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

Which of the following was NOT part of the program of credit controls imposed by the Fed in March 1980?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Inflation: Causes and Consequences

Filters