Question 1

Which of the following explains contractionary monetary policy in the long run?

Accepted Answer

A)  Contractionary monetary policy shifts aggregate demand to the left, moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real gross domestic product GDP). In the long run, as resource prices fall, the short-run aggregate supply curve shifts to the right, bringing the economy back to a long-run equilibrium, where no real changes to GDP have occurred. 
B)  Contractionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real gross domestic product GDP). In the long run, as resource prices rise, the aggregate demand curve shifts back to the left, bringing the economy back to a long-run equilibrium, where no real changes to GDP have occurred. 
C)  Contractionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real gross domestic product GDP). In the long run, as resource prices rise, the short-run aggregate supply curve shifts to the left, bringing the economy back to a long-run equilibrium, where no real changes to GDP have occurred. 
D)  Contractionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real gross domestic product GDP). In the long run, as resource prices fall, the short-run aggregate supply curve shifts to the right as well, causing the economy to expand. 
E)  Contractionary monetary policy shifts aggregate demand to the left, moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real gross domestic product GDP). In the long run, as resource prices rise, the short-run aggregate supply curve shifts to the left, causing the economy to contract. 
A)  Contractionary monetary policy shifts aggregate demand to the left, moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real gross domestic product GDP). In the long run, as resource prices fall, the short-run aggregate supply curve shifts to the right, bringing the economy back to a long-run equilibrium, where no real changes to GDP have occurred. 
B)  Contractionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real gross domestic product GDP). In the long run, as resource prices rise, the aggregate demand curve shifts back to the left, bringing the economy back to a long-run equilibrium, where no real changes to GDP have occurred. 
C)  Contractionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real gross domestic product GDP). In the long run, as resource prices rise, the short-run aggregate supply curve shifts to the left, bringing the economy back to a long-run equilibrium, where no real changes to GDP have occurred. 
D)  Contractionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real gross domestic product GDP). In the long run, as resource prices fall, the short-run aggregate supply curve shifts to the right as well, causing the economy to expand. 
E)  Contractionary monetary policy shifts aggregate demand to the left, moving the economy from long-run equilibrium to a short-run equilibrium with a lower price level and a lower level of real gross domestic product GDP). In the long run, as resource prices rise, the short-run aggregate supply curve shifts to the left, causing the economy to contract.

Question 2

Before the development of expectations theory,

Accepted Answer

A)  monetary policy prescriptions were strictly passive. 
B)  monetary policy had no real effects in the short run. 
C)  monetary policy prescriptions were strictly activist. 
D)  monetary policy only had real effects in the long run. 
E)  economists did not understand the idea of sticky prices. 
A)  monetary policy prescriptions were strictly passive. 
B)  monetary policy had no real effects in the short run. 
C)  monetary policy prescriptions were strictly activist. 
D)  monetary policy only had real effects in the long run. 
E)  economists did not understand the idea of sticky prices.

Question 3

When the Fed buys bonds from financial institutions, new money moves directly

Accepted Answer

A)  out of the loanable funds market. 
B)  into the hands of consumers. 
C)  into the loanable funds market. 
D)  out of the hands of consumers. 
E)  into short-run aggregate supply. 
A)  out of the loanable funds market. 
B)  into the hands of consumers. 
C)  into the loanable funds market. 
D)  out of the hands of consumers. 
E)  into short-run aggregate supply.

Question 4

If people anticipate the strategies of the central bank,

Accepted Answer

A)  the effects of monetary policy are amplified. 
B)  the effects of monetary policy are extremely limited. 
C)  prices become more sticky and monetary policy does not work. 
D)  the unemployment rate will decrease. 
E)  the unemployment rate will increase. 
A)  the effects of monetary policy are amplified. 
B)  the effects of monetary policy are extremely limited. 
C)  prices become more sticky and monetary policy does not work. 
D)  the unemployment rate will decrease. 
E)  the unemployment rate will increase.

Question 5

Explain the impact of contractionary monetary policy on the entire macroeconomy in the short run. Be sure to use a step-by-step analysis of the macroeconomy.

Accepted Answer

The Federal Reserve decreases the money

Question 6

Refer to the following figure to answer the next  questions.
  
-According to the figure, if an expansionary monetary policy is fully expected, that policy will cause an economy initially in full-employment equilibrium to see its price level

Accepted Answer

A)  increase from P1 to P3. 
B)  increase from P1 to P2. 
C)  initially increase from P1 to P2 and over time increase to P3. 
D)  decrease from P3 to P2. 
E)  decrease from P3 to P1. 
A)  increase from P1 to P3. 
B)  increase from P1 to P2. 
C)  initially increase from P1 to P2 and over time increase to P3. 
D)  decrease from P3 to P2. 
E)  decrease from P3 to P1.

Question 7

Explain how expansionary monetary policy can lead to inflation, and discuss the types of individuals who are hurt by unexpected inflation.

Accepted Answer

Expansionary monetary policy increases t

Question 8

Expansionary monetary policy makes the aggregate demand curve

Accepted Answer

A)  shift to the left. 
B)  become flatter. 
C)  become steeper. 
D)  shift to the right. 
E)  remain static. 
A)  shift to the left. 
B)  become flatter. 
C)  become steeper. 
D)  shift to the right. 
E)  remain static.

Question 9

Contractionary monetary policy occurs when

Accepted Answer

A)  a central bank acts to decrease the money supply in an effort to control an economy that is expanding too quickly. 
B)  Congress and the president increase taxes in an effort to control an economy that is expanding too quickly. 
C)  Congress and the president decrease taxes in an effort to stimulate the economy. 
D)  a central bank acts to increase the money supply in an effort to stimulate the economy. 
E)  a central bank acts to increase government spending in an effort to stimulate the economy. 
A)  a central bank acts to decrease the money supply in an effort to control an economy that is expanding too quickly. 
B)  Congress and the president increase taxes in an effort to control an economy that is expanding too quickly. 
C)  Congress and the president decrease taxes in an effort to stimulate the economy. 
D)  a central bank acts to increase the money supply in an effort to stimulate the economy. 
E)  a central bank acts to increase government spending in an effort to stimulate the economy.

Which of the following explains contractionary monetary policy in the long run?

Before the development of expectations theory,

When the Fed buys bonds from financial institutions, new money moves directly

If people anticipate the strategies of the central bank,

Explain the impact of contractionary monetary policy on the entire macroeconomy in the short run. Be sure to use a step-by-step analysis of the macroeconomy.

Refer to the following figure to answer the next questions. -According to the figure, if an expansionary monetary policy is fully expected, that policy will cause an economy initially in full-employment equilibrium to see its price level

Explain how expansionary monetary policy can lead to inflation, and discuss the types of individuals who are hurt by unexpected inflation.

Expansionary monetary policy makes the aggregate demand curve

Contractionary monetary policy occurs when

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

International Trade

International Finance

Filters

Exam 18: Monetary Policy Learning Objectives

Which of the following explains contractionary monetary policy in the long run?

Before the development of expectations theory,

When the Fed buys bonds from financial institutions, new money moves directly

If people anticipate the strategies of the central bank,

Explain the impact of contractionary monetary policy on the entire macroeconomy in the short run. Be sure to use a step-by-step analysis of the macroeconomy.

Refer to the following figure to answer the next questions. -According to the figure, if an expansionary monetary policy is fully expected, that policy will cause an economy initially in full-employment equilibrium to see its price level

Explain how expansionary monetary policy can lead to inflation, and discuss the types of individuals who are hurt by unexpected inflation.

Expansionary monetary policy makes the aggregate demand curve

Contractionary monetary policy occurs when

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

International Trade

International Finance

Filters