Question 1

Money and income are used interchangeably by noneconomists but mean different things.

Accepted Answer

A) True 
 B)False

Question 2

When interest rates increase,banks will normally

Accepted Answer

A)  increase lending,but decrease deposits and the money supply. 
B)  increase lending,deposits,and the money supply. 
C)  decrease lending,but increase deposits and the money supply. 
D)  decrease lending,deposits,and the money supply. 
A)  increase lending,but decrease deposits and the money supply. 
B)  increase lending,deposits,and the money supply. 
C)  decrease lending,but increase deposits and the money supply. 
D)  decrease lending,deposits,and the money supply.

Question 3

An open market sale of T-bonds by the Fed causes the money supply to

Accepted Answer

A)  fall and bond prices to fall. 
B)  rise and bond prices to fall. 
C)  rise and bond prices to rise. 
D)  fall and bond prices to rise. 
A)  fall and bond prices to fall. 
B)  rise and bond prices to fall. 
C)  rise and bond prices to rise. 
D)  fall and bond prices to rise.

Question 4

The demand for reserves increases as the price level rises because

Accepted Answer

A)  people want money to buy goods that will appreciate with inflation. 
B)  people need more money to finance transactions. 
C)  the opportunity cost of holding money increases. 
D)  higher prices reduce the value of dollar assets. 
A)  people want money to buy goods that will appreciate with inflation. 
B)  people need more money to finance transactions. 
C)  the opportunity cost of holding money increases. 
D)  higher prices reduce the value of dollar assets.

Question 5

The quantity of reserves demanded decreases as the federal funds rate rises because

Accepted Answer

A)  people want more liquid assets as the federal funds rate rises. 
B)  the price of bonds rise as the federal funds rate rises. 
C)  the opportunity cost of holding excess reserves increases as the federal funds rate rises. 
D)  people want more money to invest as the federal funds rate rises. 
A)  people want more liquid assets as the federal funds rate rises. 
B)  the price of bonds rise as the federal funds rate rises. 
C)  the opportunity cost of holding excess reserves increases as the federal funds rate rises. 
D)  people want more money to invest as the federal funds rate rises.

Question 6

We should expect to see home construction activity decrease when interest rates increase.

Accepted Answer

A) True 
 B)False

Question 7

Under what conditions will the inflationary impact of an expansionary monetary policy be the largest?

Accepted Answer

A)  When equilibrium real GDP is at potential real GDP. 
B)  When there is a recessionary gap. 
C)  When unemployment rates are high and there is substantial excess industrial capacity. 
D)  When real GDP is falling and the price level is decreasing. 
A)  When equilibrium real GDP is at potential real GDP. 
B)  When there is a recessionary gap. 
C)  When unemployment rates are high and there is substantial excess industrial capacity. 
D)  When real GDP is falling and the price level is decreasing.

Question 8

The concept of "lender of last resort" is that when

Accepted Answer

A)  lending decreases,the Fed will be the last to resort to higher interest rates. 
B)  borrowing increases,the Fed will be the last to increase lending. 
C)  commercial banks are hesitant to lend,the Fed will step in and increase reserves. 
D)  a borrower has tried everyone else,the Fed will lend directly to them. 
A)  lending decreases,the Fed will be the last to resort to higher interest rates. 
B)  borrowing increases,the Fed will be the last to increase lending. 
C)  commercial banks are hesitant to lend,the Fed will step in and increase reserves. 
D)  a borrower has tried everyone else,the Fed will lend directly to them.

Question 9

Money supply is to income as

Accepted Answer

A)  real is to ideal. 
B)  stock is to flow. 
C)  real is to nominal. 
D)  flow is to stock. 
A)  real is to ideal. 
B)  stock is to flow. 
C)  real is to nominal. 
D)  flow is to stock.

Question 10

Are money and income the same thing?

Accepted Answer

A)  No,money is measured at a point in time and income is measured for a period of time. 
B)  No,money is measured for a period of time and income is measured at a point in time. 
C)  Yes,they are just measured in different ways. 
D)  Yes,the only difference is real versus nominal. 
A)  No,money is measured at a point in time and income is measured for a period of time. 
B)  No,money is measured for a period of time and income is measured at a point in time. 
C)  Yes,they are just measured in different ways. 
D)  Yes,the only difference is real versus nominal.

Question 11

When the Fed sells a government security to the public,how does it usually receive payment for the security?

Accepted Answer

A)  by accepting checks on bank accounts 
B)  by drawing money out of circulation 
C)  by decreasing member bank profits not distributed by the Fed 
D)  by decreasing reserves in bank accounts at the Fed 
A)  by accepting checks on bank accounts 
B)  by drawing money out of circulation 
C)  by decreasing member bank profits not distributed by the Fed 
D)  by decreasing reserves in bank accounts at the Fed

Question 12

The Federal Reserve System was established by Congress in 1914

Accepted Answer

A)  as a result of a breakthrough in economic theory. 
B)  against significant opposition from the banking sector. 
C)  because of the need for a central bank. 
D)  as the world's first central bank. 
A)  as a result of a breakthrough in economic theory. 
B)  against significant opposition from the banking sector. 
C)  because of the need for a central bank. 
D)  as the world's first central bank.

Question 13

In Table 13-1,the Federal Reserve System has

Accepted Answer

A)  sold $10 million in government securities to banks,taking payment in cash. 
B)  sold $10 million in government securities to banks,taking payment from the bank's reserves. 
C)  purchased $10 million in government securities from banks,paying for them with increases in banks' reserves. 
D)  purchased $10 million in government securities from banks,paying for them with new Federal Reserve notes. 
A)  sold $10 million in government securities to banks,taking payment in cash. 
B)  sold $10 million in government securities to banks,taking payment from the bank's reserves. 
C)  purchased $10 million in government securities from banks,paying for them with increases in banks' reserves. 
D)  purchased $10 million in government securities from banks,paying for them with new Federal Reserve notes.

Question 14

If the Fed sells $5 million in government bonds,how much will the money supply change?

Accepted Answer

A)  It will increase by $5 million. 
B)  It will increase by more than $5 million. 
C)  It will decrease by $5 million. 
D)  It will decrease by more than $5 million. 
A)  It will increase by $5 million. 
B)  It will increase by more than $5 million. 
C)  It will decrease by $5 million. 
D)  It will decrease by more than $5 million.

Question 15

Which of the following observations is true?

Accepted Answer

A)  State governments are the shareholders of the Fed. 
B)  The Fed chairman is appointed for a ten year term. 
C)  FOMC decisions largely determine short-term interest rates. 
D)  Member banks proportionately share all of Federal Reserve's profits. 
A)  State governments are the shareholders of the Fed. 
B)  The Fed chairman is appointed for a ten year term. 
C)  FOMC decisions largely determine short-term interest rates. 
D)  Member banks proportionately share all of Federal Reserve's profits.

Question 16

The Federal Reserve System can be described as a bank for bankers.

Accepted Answer

A) True 
 B)False

Question 17

Who is considered to be the most powerful person in the economic world by many observers?

Accepted Answer

A)  Federal Reserve Chair 
B)  EU Central Bank President 
C)  Director-General of the WTO 
D)  World Bank President 
A)  Federal Reserve Chair 
B)  EU Central Bank President 
C)  Director-General of the WTO 
D)  World Bank President

Question 18

How are Treasury bond prices affected when the interest rate falls?

Accepted Answer

A)  The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year,so the price of the bond must decrease. 
B)  The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year,so the price of the bond must increase. 
C)  The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year,so the price of the bond must decrease. 
D)  The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year,so the price of the bond must increase. 
A)  The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year,so the price of the bond must decrease. 
B)  The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year,so the price of the bond must increase. 
C)  The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year,so the price of the bond must decrease. 
D)  The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year,so the price of the bond must increase.

Question 19

If the Fed sells a T-bill to a commercial bank,how will this affect the money supply?

Accepted Answer

A)  It will increase the money supply. 
B)  It will increase bank reserves. 
C)  It will decrease the money supply. 
D)  It will have no effect on the money supply. 
A)  It will increase the money supply. 
B)  It will increase bank reserves. 
C)  It will decrease the money supply. 
D)  It will have no effect on the money supply.

Question 20

Each Federal Reserve district bank is a corporation owned by

Accepted Answer

A)  the member banks in the district. 
B)  the people of the United States. 
C)  the U.S.Department of the Treasury. 
D)  federal securities owners. 
A)  the member banks in the district. 
B)  the people of the United States. 
C)  the U.S.Department of the Treasury. 
D)  federal securities owners.

Money and income are used interchangeably by noneconomists but mean different things.

When interest rates increase,banks will normally

An open market sale of T-bonds by the Fed causes the money supply to

The demand for reserves increases as the price level rises because

The quantity of reserves demanded decreases as the federal funds rate rises because

We should expect to see home construction activity decrease when interest rates increase.

Under what conditions will the inflationary impact of an expansionary monetary policy be the largest?

The concept of "lender of last resort" is that when

Money supply is to income as

Are money and income the same thing?

When the Fed sells a government security to the public,how does it usually receive payment for the security?

The Federal Reserve System was established by Congress in 1914

In Table 13-1,the Federal Reserve System has

If the Fed sells $5 million in government bonds,how much will the money supply change?

Which of the following observations is true?

The Federal Reserve System can be described as a bank for bankers.

Who is considered to be the most powerful person in the economic world by many observers?

How are Treasury bond prices affected when the interest rate falls?

If the Fed sells a T-bill to a commercial bank,how will this affect the money supply?

Each Federal Reserve district bank is a corporation owned by

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 13: Monetary Policy Conventional and Unconventional

Money and income are used interchangeably by noneconomists but mean different things.

When interest rates increase,banks will normally

An open market sale of T-bonds by the Fed causes the money supply to

The demand for reserves increases as the price level rises because

The quantity of reserves demanded decreases as the federal funds rate rises because

We should expect to see home construction activity decrease when interest rates increase.

Under what conditions will the inflationary impact of an expansionary monetary policy be the largest?

The concept of "lender of last resort" is that when

Money supply is to income as

Are money and income the same thing?

When the Fed sells a government security to the public,how does it usually receive payment for the security?

The Federal Reserve System was established by Congress in 1914

In Table 13-1,the Federal Reserve System has

If the Fed sells $5 million in government bonds,how much will the money supply change?

Which of the following observations is true?

The Federal Reserve System can be described as a bank for bankers.

Who is considered to be the most powerful person in the economic world by many observers?

How are Treasury bond prices affected when the interest rate falls?

If the Fed sells a T-bill to a commercial bank,how will this affect the money supply?

Each Federal Reserve district bank is a corporation owned by

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters