Question 1

The Taylor rule relates

Accepted Answer

A) inflation rates to unemployment rates 
B) the federal funds rate to inflation and output rates. 
C) differences in the federal funds rate from its target to differences in inflation and unemployment from its target. 
D) differences in the federal funds rate from its target to differences in inflation and unemployment from its target 
E) All of the above 
A) inflation rates to unemployment rates 
B) the federal funds rate to inflation and output rates. 
C) differences in the federal funds rate from its target to differences in inflation and unemployment from its target. 
D) differences in the federal funds rate from its target to differences in inflation and unemployment from its target 
E) All of the above

Question 2

An argument against inflation targeting is that

Accepted Answer

A) the Fed does not completely control inflation. 
B) it rules out stabilization policy. 
C) puts too much emphasis on low inflation. 
D) All of the above 
A) the Fed does not completely control inflation. 
B) it rules out stabilization policy. 
C) puts too much emphasis on low inflation. 
D) All of the above

Question 3

Policy is conducted via a rule if policymakers

Accepted Answer

A) use monetary and fiscal policy only when the political situation dictates it. 
B) set monetary and fiscal policy according to multiple but predetermined goals. 
C) a free to respond to unexpected changes in economic conditions. 
D) announce in advance how they will respond to changes in economic conditions. 
A) use monetary and fiscal policy only when the political situation dictates it. 
B) set monetary and fiscal policy according to multiple but predetermined goals. 
C) a free to respond to unexpected changes in economic conditions. 
D) announce in advance how they will respond to changes in economic conditions.

Question 4

Which of the following statements is (are)correct? Regardless of whether the LM curve is vertical or upward sloping,

Accepted Answer

A) a money stock target is superior to an interest rate target when the uncertainty facing the policymaker concerns the IS schedule. 
B) an interest rate target is always superior to a money stock target when the uncertainty facing the policymaker concerns the IS schedule. 
C) both a money stock target or interest rate target provide the same results when the uncertainty facing the policymaker concerns the IS schedule. 
D) a money stock target is never superior to an interest rate target when the uncertainty facing the policymaker concerns the IS schedule. 
A) a money stock target is superior to an interest rate target when the uncertainty facing the policymaker concerns the IS schedule. 
B) an interest rate target is always superior to a money stock target when the uncertainty facing the policymaker concerns the IS schedule. 
C) both a money stock target or interest rate target provide the same results when the uncertainty facing the policymaker concerns the IS schedule. 
D) a money stock target is never superior to an interest rate target when the uncertainty facing the policymaker concerns the IS schedule.

Question 5

If the great majority of shocks to our system arise from unpredictable shocks to money demand,the preferred tactic of monetary policy is targeting

Accepted Answer

A) reserves. 
B) interest rates. 
C) M2. 
D) reserves plus currency. 
A) reserves. 
B) interest rates. 
C) M2. 
D) reserves plus currency.

Question 6

If the Fed has the discretion to choose its policy and announces a low inflation policy,then

Accepted Answer

A) the public is likely to discount this claim because the Fed has an incentive to change their policy in the future. 
B) the public is likely to believe this claim because the Fed has no incentive to change their policy in the future. 
C) the Fed will always cheat and increase inflation in the future. 
D) the Fed will have to keep inflation lower in the future or they will be voted out of office. 
E) none of the above. 
A) the public is likely to discount this claim because the Fed has an incentive to change their policy in the future. 
B) the public is likely to believe this claim because the Fed has no incentive to change their policy in the future. 
C) the Fed will always cheat and increase inflation in the future. 
D) the Fed will have to keep inflation lower in the future or they will be voted out of office. 
E) none of the above.

Question 7

Unlike a money supply target,an inflation rate target

Accepted Answer

A) will always stabilize income better. 
B) will stabilize income better if velocity is unstable. 
C) still allows the Fed unlimited discretion. 
D) eliminates the need for a central bank. 
A) will always stabilize income better. 
B) will stabilize income better if velocity is unstable. 
C) still allows the Fed unlimited discretion. 
D) eliminates the need for a central bank.

Question 8

Which of the following statements is (are)correct? Over the past 20 years,the Federal Reserve

Accepted Answer

A) has only targeted monetary aggregates. 
B) has varied between an emphasis on interest rate control and targeting of monetary aggregates. 
C) has only emphasized control of the interest rate. 
D) None of the above 
A) has only targeted monetary aggregates. 
B) has varied between an emphasis on interest rate control and targeting of monetary aggregates. 
C) has only emphasized control of the interest rate. 
D) None of the above

Question 9

Monetarists are in favor of

Accepted Answer

A) inflation targeting. 
B) interest rate targeting. 
C) output targeting. 
D) nominal income targeting. 
E) money growth targeting. 
A) inflation targeting. 
B) interest rate targeting. 
C) output targeting. 
D) nominal income targeting. 
E) money growth targeting.

Question 10

Assume that the Federal Reserve replaces the money stock with the interest rate as an intermediate target.Then,

Accepted Answer

A) the range for the target interest rate would be chosen to hit the inflation rate,unemployment rate,and growth rate of the economy. 
B) if the Treasury bill rate fell temporarily below the target range,the Open Market Desk would sell securities in the open market until the Treasury bill rate rose to the target range. 
C) if the Treasury bill rate rose above the target range,the Open Market Desk would purchase Treasury bills or other government securities. 
D) All of the above 
A) the range for the target interest rate would be chosen to hit the inflation rate,unemployment rate,and growth rate of the economy. 
B) if the Treasury bill rate fell temporarily below the target range,the Open Market Desk would sell securities in the open market until the Treasury bill rate rose to the target range. 
C) if the Treasury bill rate rose above the target range,the Open Market Desk would purchase Treasury bills or other government securities. 
D) All of the above

Question 11

According to the Taylor rule,when inflation and/or output is above its target,then:

Accepted Answer

A) the federal funds rate must be negative. 
B) the federal funds rate must be above its target. 
C) the federal funds rate must be above inflation. 
D) none of the above are correct. 
A) the federal funds rate must be negative. 
B) the federal funds rate must be above its target. 
C) the federal funds rate must be above inflation. 
D) none of the above are correct.

Question 12

The FOMC meets approximately eight times per year and at these meetings they

Accepted Answer

A) set a target federal funds interest rate. 
B) set a target money supply. 
C) set a target employment target. 
D) All of the above 
E) None of the above 
A) set a target federal funds interest rate. 
B) set a target money supply. 
C) set a target employment target. 
D) All of the above 
E) None of the above

Question 13

Policy is conducted via discretion if policymakers

Accepted Answer

A) announce and achieve a constant money supply. 
B) announce and achieve a constant interest rate. 
C) are free to respond to changes in economic conditions on a case-by-case basis. 
D) announce in advance how they will respond to changes in economic conditions. 
A) announce and achieve a constant money supply. 
B) announce and achieve a constant interest rate. 
C) are free to respond to changes in economic conditions on a case-by-case basis. 
D) announce in advance how they will respond to changes in economic conditions.

Question 14

According to the Taylor rule,how should monetary policy and interest rates change in response to a situation in which actual output exceeds the natural rate of output? In what sense is the Taylor rule consistent with Keynesian stabilization policy? Explain.

Accepted Answer

According to the Taylor rule,whenever ac

Question 15

If the Federal Reserve "pegs" the interest rate,then in the IS-LM framework,the LM schedule

Accepted Answer

A) is vertical. 
B) becomes horizontal. 
C) slopes upward to the right. 
D) slopes downward and the left. 
A) is vertical. 
B) becomes horizontal. 
C) slopes upward to the right. 
D) slopes downward and the left.

Question 16

If the financial innovations such as ATM machines make money demand less elastic than it was before,then

Accepted Answer

A) the LM curve will become steeper. 
B) the LM curve will become flatter. 
C) both the IS and LM curves will become flatter. 
D) the LM curve will shift to the left. 
A) the LM curve will become steeper. 
B) the LM curve will become flatter. 
C) both the IS and LM curves will become flatter. 
D) the LM curve will shift to the left.

Question 17

What is the FOMC? Who votes on the FOMC? How often does it meet? What is the outcome of their meetings?

Accepted Answer

The FOMC is composed of the seven board

Question 18

Which of the following statements is (are)correct?

Accepted Answer

A) Not all economists believe that time inconsistency problems are important for real world monetary policy. 
B) Time inconsistency problems cannot explain higher inflation in the post-war era. 
C) Time inconsistency problems exist in contexts other than monetary policy. 
D) Both a and c 
E) All of the above 
A) Not all economists believe that time inconsistency problems are important for real world monetary policy. 
B) Time inconsistency problems cannot explain higher inflation in the post-war era. 
C) Time inconsistency problems exist in contexts other than monetary policy. 
D) Both a and c 
E) All of the above

Question 19

Which of the following is not considered an ultimate target that the monetary authority attempts to control?

Accepted Answer

A) Growth in real GDP 
B) The rate of unemployment 
C) The rate of inflation 
D) The money supply 
A) Growth in real GDP 
B) The rate of unemployment 
C) The rate of inflation 
D) The money supply

Question 20

If the central bank targets the money stock,then a negative shock to money demand will

Accepted Answer

A) shift the LM schedule to the right and income will rise above the target level. 
B) shift the LM schedule up and income will fall below the target level. 
C) not shift the LM schedule and,therefore,will not displace income from the target level. 
D) None of the above 
A) shift the LM schedule to the right and income will rise above the target level. 
B) shift the LM schedule up and income will fall below the target level. 
C) not shift the LM schedule and,therefore,will not displace income from the target level. 
D) None of the above

The Taylor rule relates

An argument against inflation targeting is that

Policy is conducted via a rule if policymakers

Which of the following statements is (are)correct? Regardless of whether the LM curve is vertical or upward sloping,

If the great majority of shocks to our system arise from unpredictable shocks to money demand,the preferred tactic of monetary policy is targeting

If the Fed has the discretion to choose its policy and announces a low inflation policy,then

Unlike a money supply target,an inflation rate target

Which of the following statements is (are)correct? Over the past 20 years,the Federal Reserve

Monetarists are in favor of

Assume that the Federal Reserve replaces the money stock with the interest rate as an intermediate target.Then,

According to the Taylor rule,when inflation and/or output is above its target,then:

The FOMC meets approximately eight times per year and at these meetings they

Policy is conducted via discretion if policymakers

According to the Taylor rule,how should monetary policy and interest rates change in response to a situation in which actual output exceeds the natural rate of output? In what sense is the Taylor rule consistent with Keynesian stabilization policy? Explain.

If the Federal Reserve "pegs" the interest rate,then in the IS-LM framework,the LM schedule

If the financial innovations such as ATM machines make money demand less elastic than it was before,then

What is the FOMC? Who votes on the FOMC? How often does it meet? What is the outcome of their meetings?

Which of the following statements is (are)correct?

Which of the following is not considered an ultimate target that the monetary authority attempts to control?

If the central bank targets the money stock,then a negative shock to money demand will

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 Taylor rule relates

An argument against inflation targeting is that

Policy is conducted via a rule if policymakers

Which of the following statements is (are)correct? Regardless of whether the LM curve is vertical or upward sloping,

If the great majority of shocks to our system arise from unpredictable shocks to money demand,the preferred tactic of monetary policy is targeting

If the Fed has the discretion to choose its policy and announces a low inflation policy,then

Unlike a money supply target,an inflation rate target

Which of the following statements is (are)correct? Over the past 20 years,the Federal Reserve

Monetarists are in favor of

Assume that the Federal Reserve replaces the money stock with the interest rate as an intermediate target.Then,

According to the Taylor rule,when inflation and/or output is above its target,then:

The FOMC meets approximately eight times per year and at these meetings they

Policy is conducted via discretion if policymakers

According to the Taylor rule,how should monetary policy and interest rates change in response to a situation in which actual output exceeds the natural rate of output? In what sense is the Taylor rule consistent with Keynesian stabilization policy? Explain.

If the Federal Reserve "pegs" the interest rate,then in the IS-LM framework,the LM schedule

If the financial innovations such as ATM machines make money demand less elastic than it was before,then

What is the FOMC? Who votes on the FOMC? How often does it meet? What is the outcome of their meetings?

Which of the following statements is (are)correct?

Which of the following is not considered an ultimate target that the monetary authority attempts to control?

If the central bank targets the money stock,then a negative shock to money demand will

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