Question 1

The voting members of the Open Market Committee are

Accepted Answer

A) the 7 Governors of the Federal Reserve System. 
B) the 12 presidents of the Federal Reserve Banks. 
C) the 7 Governors and the Chairman of the Council of Economic Advisors. 
D) the 7 Governors and 5 of the presidents of the 12 regional Federal Reserve Banks. 
A) the 7 Governors of the Federal Reserve System. 
B) the 12 presidents of the Federal Reserve Banks. 
C) the 7 Governors and the Chairman of the Council of Economic Advisors. 
D) the 7 Governors and 5 of the presidents of the 12 regional Federal Reserve Banks. D

Question 2

Assuming that the central bank is following a money stock targeted,an exogenous rise in investment demand

Accepted Answer

A) causes income to rise but the money stock has to be increased to accommodate the expansion. 
B) has to be accommodated with open market purchases to expand the money stock. 
C) increases income,money demand,and lowers the interest rate. 
D) increases income and money demand and lowers the interest rate. 
E) none of the above. 
A) causes income to rise but the money stock has to be increased to accommodate the expansion. 
B) has to be accommodated with open market purchases to expand the money stock. 
C) increases income,money demand,and lowers the interest rate. 
D) increases income and money demand and lowers the interest rate. 
E) none of the above. E

Question 3

"The independence of the Fed leaves it unaccountable for its actions." Do you agree or disagree with this statement?

Accepted Answer

The Federal Reserve is not completely independent for a number of reasons,most importantly that it was created by an act of congress and can be disbanded by an act of congress.Also,the chair is up for reappointment every four years.Finally,the chair has to appear regularly before congress to answer questions.

Question 4

Intermediate targeting the money supply is preferable if there is a(n)

Accepted Answer

A) increase in the severity of supply shocks. 
B) unstable money demand function. 
C) low interest elasticity of money demand. 
D) difficulty in the measurement of money demand. 
E) none of the above. 
A) increase in the severity of supply shocks. 
B) unstable money demand function. 
C) low interest elasticity of money demand. 
D) difficulty in the measurement of money demand. 
E) none of the above.

Question 5

If money demand does not depend on the interest rate then

Accepted Answer

A) the LM curve if vertical and fiscal policy is ineffective. 
B) the LM curve is horizontal and fiscal policy is ineffective. 
C) the LM curve is horizontal and horizontal has no effect on output. 
D) the LM curve is vertical and monetary policy is ineffective. 
A) the LM curve if vertical and fiscal policy is ineffective. 
B) the LM curve is horizontal and fiscal policy is ineffective. 
C) the LM curve is horizontal and horizontal has no effect on output. 
D) the LM curve is vertical and monetary policy is ineffective.

Question 6

The money-stock target is preferable when uncertainty is the result of unpredictable shifts in which of the following?

Accepted Answer

A) expectations in future profitability 
B) Residential construction investment 
C) the money multiplier 
D) Both a and b 
E) All of the above 
A) expectations in future profitability 
B) Residential construction investment 
C) the money multiplier 
D) Both a and b 
E) All of the above

Question 7

After two decades with inflationary rates that exceeded the Organization for Economic Co-operation and Development average and with output growth rates that fell short of that average,the New Zealand government adopted a very strict form of inflation targeting in 1990.Explain the New Zealand experiment and its strict form of inflation targeting.

Accepted Answer

The main provisions for monetary policy

Question 8

Inflation targeting is one policy that attempts to deal with the problem of:

Accepted Answer

A) dollarization. 
B) time inconsistency. 
C) the tradeoff between inflation and unemployment. 
D) the liquidity trap. 
E) none of the above. 
A) dollarization. 
B) time inconsistency. 
C) the tradeoff between inflation and unemployment. 
D) the liquidity trap. 
E) none of the above.

Question 9

Assume that targeted inflation is 1 percent.According to the Taylor rule,the federal funds rate is:

Accepted Answer

A) equal to 2 percent if inflation and output are at their target level. 
B) equal to 6 percent if inflation is 3 percent,output is at its target level and the Fed's targeted federal funds rate is 2 percent. 
C) equal to 4 percent if inflation is 2 percent ,output is 2 percent above its target level and the Fed's targeted federal funds rate is 2 percent. 
D) none of the above are correct. 
A) equal to 2 percent if inflation and output are at their target level. 
B) equal to 6 percent if inflation is 3 percent,output is at its target level and the Fed's targeted federal funds rate is 2 percent. 
C) equal to 4 percent if inflation is 2 percent ,output is 2 percent above its target level and the Fed's targeted federal funds rate is 2 percent. 
D) none of the above are correct.

Question 10

Does targeting the money supply become more or less effective if money demand is highly interest rate elastic? Use a graph to explain your intuition.

Accepted Answer

Monetary policy is less effective.Target

Question 11

Under what conditions is a money-stock target considered superior to an interest-rate target? Under what conditions is an interest-rate target preferred to a money-stock target?

Accepted Answer

A money-stock target is superior to an i

Question 12

Assuming the central bank follows a money supply target,then an increase in the demand for money

Accepted Answer

A) will shift the position of the LM schedule away from the predicted level even if the target level of the money supply is achieved. 
B) will shift the position of the LM schedule toward the predicted level as long as the target level of the money supply is achieved. 
C) may or may not shift the position of the LM schedule away from the predicted level even if the target level of the money supply is achieved. 
D) None of the above 
A) will shift the position of the LM schedule away from the predicted level even if the target level of the money supply is achieved. 
B) will shift the position of the LM schedule toward the predicted level as long as the target level of the money supply is achieved. 
C) may or may not shift the position of the LM schedule away from the predicted level even if the target level of the money supply is achieved. 
D) None of the above

Question 13

Relative to fiscal policy,monetary policy

Accepted Answer

A) has fewer harmful side effects. 
B) requires much more time to implement. 
C) is more closely controlled by Congress. 
D) is much more independent of the political process. 
A) has fewer harmful side effects. 
B) requires much more time to implement. 
C) is more closely controlled by Congress. 
D) is much more independent of the political process.

Question 14

Discuss the merits of a money growth rule versus an inflation target rule.Which was preferred by Monetarists? Which is the most widely used today,and why?

Accepted Answer

The monetarist argument for a money grow

Question 15

Throughout the 1980s,the Federal Reserve

Accepted Answer

A) primarily targeted M1. 
B) primarily targeted M2. 
C) returned to targeting the federal funds rate. 
D) began targeting inflation. 
A) primarily targeted M1. 
B) primarily targeted M2. 
C) returned to targeting the federal funds rate. 
D) began targeting inflation.

Question 16

A variable that the Federal Reserve focuses on because it has a direct link to the variables the Fed is ultimately concerned about is known as a(n)

Accepted Answer

A) median target. 
B) short-term target. 
C) immediate target. 
D) intermediate target. 
A) median target. 
B) short-term target. 
C) immediate target. 
D) intermediate target.

Question 17

In the United States,the strategy of monetary policy

Accepted Answer

A) has not changed even as the economic environment has varied. 
B) has been to target interest rates. 
C) has been to target the money supply. 
D) None of the above 
A) has not changed even as the economic environment has varied. 
B) has been to target interest rates. 
C) has been to target the money supply. 
D) None of the above

Question 18

An index constructed by Alberto Alesina and Lawrence Summers measuring central bank independence for a sample of industrialized countries during the late 1980s notes that the

Accepted Answer

A) most countries have completely independent central banks. 
B) countries with less independent central banks had lower inflation rates. 
C) the most independent central banks were those of Switzerland and Germany,followed by the U.S.Federal Reserve. 
D) there has been a trend away from central bank independence among countries 
E) both c and d 
A) most countries have completely independent central banks. 
B) countries with less independent central banks had lower inflation rates. 
C) the most independent central banks were those of Switzerland and Germany,followed by the U.S.Federal Reserve. 
D) there has been a trend away from central bank independence among countries 
E) both c and d

Question 19

The Federal funds rate

Accepted Answer

A) is the interest rate on borrowing from the Federal Reserve. 
B) measures the volume of reserves. 
C) is the interest rate charged on loans from one bank to another. 
D) is the interest rate charged on all commercial loans. 
A) is the interest rate on borrowing from the Federal Reserve. 
B) measures the volume of reserves. 
C) is the interest rate charged on loans from one bank to another. 
D) is the interest rate charged on all commercial loans.

Question 20

On October 6,1979,the Federal Reserve abandoned the strategy of targeting the Federal funds rate and focused on target ranges for growth in the monetary aggregates.Since that time,the Federal Reserve

Accepted Answer

A) has never deviated from that strategy. 
B) gave up on interest rate targeting. 
C) deviated from target ranges for growth in the monetary aggregates when inflation and unemployment were high. 
D) None of the above 
A) has never deviated from that strategy. 
B) gave up on interest rate targeting. 
C) deviated from target ranges for growth in the monetary aggregates when inflation and unemployment were high. 
D) None of the above

The voting members of the Open Market Committee are

Assuming that the central bank is following a money stock targeted,an exogenous rise in investment demand

"The independence of the Fed leaves it unaccountable for its actions." Do you agree or disagree with this statement?

Intermediate targeting the money supply is preferable if there is a(n)

If money demand does not depend on the interest rate then

The money-stock target is preferable when uncertainty is the result of unpredictable shifts in which of the following?

Inflation targeting is one policy that attempts to deal with the problem of:

Assume that targeted inflation is 1 percent.According to the Taylor rule,the federal funds rate is:

Does targeting the money supply become more or less effective if money demand is highly interest rate elastic? Use a graph to explain your intuition.

Under what conditions is a money-stock target considered superior to an interest-rate target? Under what conditions is an interest-rate target preferred to a money-stock target?

Assuming the central bank follows a money supply target,then an increase in the demand for money

Relative to fiscal policy,monetary policy

Discuss the merits of a money growth rule versus an inflation target rule.Which was preferred by Monetarists? Which is the most widely used today,and why?

Throughout the 1980s,the Federal Reserve

A variable that the Federal Reserve focuses on because it has a direct link to the variables the Fed is ultimately concerned about is known as a(n)

In the United States,the strategy of monetary policy

An index constructed by Alberto Alesina and Lawrence Summers measuring central bank independence for a sample of industrialized countries during the late 1980s notes that the

The Federal funds rate

On October 6,1979,the Federal Reserve abandoned the strategy of targeting the Federal funds rate and focused on target ranges for growth in the monetary aggregates.Since that time,the Federal Reserve

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters

Exam 17: Optimal Monetary Policy

The voting members of the Open Market Committee are

Assuming that the central bank is following a money stock targeted,an exogenous rise in investment demand

"The independence of the Fed leaves it unaccountable for its actions." Do you agree or disagree with this statement?

Intermediate targeting the money supply is preferable if there is a(n)

If money demand does not depend on the interest rate then

The money-stock target is preferable when uncertainty is the result of unpredictable shifts in which of the following?

Inflation targeting is one policy that attempts to deal with the problem of:

Assume that targeted inflation is 1 percent.According to the Taylor rule,the federal funds rate is:

Does targeting the money supply become more or less effective if money demand is highly interest rate elastic? Use a graph to explain your intuition.

Under what conditions is a money-stock target considered superior to an interest-rate target? Under what conditions is an interest-rate target preferred to a money-stock target?

Assuming the central bank follows a money supply target,then an increase in the demand for money

Relative to fiscal policy,monetary policy

Discuss the merits of a money growth rule versus an inflation target rule.Which was preferred by Monetarists? Which is the most widely used today,and why?

Throughout the 1980s,the Federal Reserve

A variable that the Federal Reserve focuses on because it has a direct link to the variables the Fed is ultimately concerned about is known as a(n)

In the United States,the strategy of monetary policy

An index constructed by Alberto Alesina and Lawrence Summers measuring central bank independence for a sample of industrialized countries during the late 1980s notes that the

The Federal funds rate

On October 6,1979,the Federal Reserve abandoned the strategy of targeting the Federal funds rate and focused on target ranges for growth in the monetary aggregates.Since that time,the Federal Reserve

Introduction

Measurement of Macroeconomic Variables

Classical Macroeconomics I: Output and Employment

Classical Macroeconomics II: Money,prices,and Interest

Keynesian System I: the Role of Aggregate Demand

Keynesian System II: Money,interest,and Income

Keynesian System III: Policy Effects in the Is-Lm Model

Keynesian System Iv: Aggregate Supply and Demand

The Monetarist Counterrevolution

Output,inflation,and Unemployment: Alternative Views

New Classical Economics

Real Business Cycles and New Keynesian Economics

Macroeconomic Models:a Summary

Exchange Rates and the International Monetary System

Monetary and Fiscal Policy in the Open Economy

Money,the Banking System,and Interest Rates

Fiscal Policy

Policies for Intermediate-Run Growth

Long-Run Economic Growth: Origins of the Wealth of Nations

Filters