Question 1

Which of the following phrases indicates that income is being spoken of?

Accepted Answer

A)  Tuesday, at 12:30 p.m. 
B)  July 14, 1948 
C)  from January 1 to March 30 
D)  yesterday afternoon 
A)  Tuesday, at 12:30 p.m. 
B)  July 14, 1948 
C)  from January 1 to March 30 
D)  yesterday afternoon

Question 2

The principal objective of the Federal Reserve System is to

Accepted Answer

A)  circulate coins and paper Federal Reserve Notes. 
B)  subsidize the income of member banks. 
C)  help stabilize the economy through monetary policy. 
D)  make profits to remit to the Treasury Department. 
A)  circulate coins and paper Federal Reserve Notes. 
B)  subsidize the income of member banks. 
C)  help stabilize the economy through monetary policy. 
D)  make profits to remit to the Treasury Department.

Question 3

When someone asks how much money you made this year, they are using the term "money" correctly.

Accepted Answer

A) True 
 B)False

Question 4

At higher interest rates, banks will want to hold more reserves.

Accepted Answer

A) True 
 B)False

Question 5

Define the following terms and explain their importance to the study of macroeconomics.
a.central bank
b.Federal Open Market Committee
c.supply of money
d.monetary policy

Accepted Answer

a.A central bank is a government institu

Question 6

If the Fed's open market operations expand the money supply, one can expect

Accepted Answer

A)  a decrease in excess reserves. 
B)  bond prices to rise. 
C)  interest rates to rise. 
D)  open market sales of T-bills. 
A)  a decrease in excess reserves. 
B)  bond prices to rise. 
C)  interest rates to rise. 
D)  open market sales of T-bills.

Question 7

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 8

If the Fed buys more bonds from the public, and increases the price it is willing to pay for the bonds, what will happen to interest rates?

Accepted Answer

A)  They will rise. 
B)  They will fall. 
C)  They will remain unchanged. 
D)  The relationship between bond prices and interest rates is unclear. 
A)  They will rise. 
B)  They will fall. 
C)  They will remain unchanged. 
D)  The relationship between bond prices and interest rates is unclear.

Question 9

Reserves demanded varies

Accepted Answer

A)  inversely with both prices and output. 
B)  inversely with prices and directly with output. 
C)  directly with prices and inversely with output. 
D)  directly with both prices and output. 
A)  inversely with both prices and output. 
B)  inversely with prices and directly with output. 
C)  directly with prices and inversely with output. 
D)  directly with both prices and output.

Question 10

Assume the required reserve ratio is 20 percent and the FOMC orders an open market purchase of $100 million in government securities from member banks.If the oversimplified money multiplier is assumed, then the money supply will

Accepted Answer

A)  increase by $500 million. 
B)  increase by $100 million. 
C)  decrease by $100 million. 
D)  decrease by $500 million. 
A)  increase by $500 million. 
B)  increase by $100 million. 
C)  decrease by $100 million. 
D)  decrease by $500 million.

Question 11

The correct chain of causation illustrating the changes caused by monetary policy is

Accepted Answer

A)  money, interest rates, C + I + G + (X - IM), I. 
B)  money, interest rates, I, C + I + G + (X - IM). 
C)  C + I + G + (X - IM), I, interest rates, money. 
D)  I, C + I + G + (X - IM), money, interest rates. 
A)  money, interest rates, C + I + G + (X - IM), I. 
B)  money, interest rates, I, C + I + G + (X - IM). 
C)  C + I + G + (X - IM), I, interest rates, money. 
D)  I, C + I + G + (X - IM), money, interest rates.

Question 12

The Federal Reserve Bank was modeled after the European Central Bank.

Accepted Answer

A) True 
 B)False

Question 13

Figure 13-1
  
-In Figure 13-1, which panel shows the effect of a recession on the interest rate?

Accepted Answer

A)  Panel (
A)  
B)  Panel (
B)  
C)  Panel (
C)  
D)  Panel (
D)  
A)  Panel (
A)  
B)  Panel (
B)  
C)  Panel (
C)  
D)  Panel (
D)

Question 14

In the Keynesian causal chain, changes in GDP cause changes in the level of interest rates.

Accepted Answer

A) True 
 B)False

Question 15

The Federal Reserve System is a(n)

Accepted Answer

A)  corporation owned by its member banks. 
B)  independent branch of the U.S.government. 
C)  corporation owned by the government and member banks. 
D)  agency created by presidential executive order. 
A)  corporation owned by its member banks. 
B)  independent branch of the U.S.government. 
C)  corporation owned by the government and member banks. 
D)  agency created by presidential executive order.

Question 16

The Fed is unlike other central banks in that it

Accepted Answer

A)  has 12 branches. 
B)  is completely centralized. 
C)  has no real powers. 
D)  also has control over fiscal policy. 
A)  has 12 branches. 
B)  is completely centralized. 
C)  has no real powers. 
D)  also has control over fiscal policy.

Question 17

If the Fed buys $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 18

The demand for reserves depends on income and the price level.

Accepted Answer

A) True 
 B)False

Question 19

Table 13-1
EFFECTS OF AN OPEN MARKET TRANSACTION ON THE BALANCE SHEETS OF BANKS AND THE FED (In millions of dollars)
 $\begin{array}{cccc}
\text { BANKS }&&\text { FEDERAL RESERVE SYSTEM }\
\text { ASSETS } & \text { LIAB. } & \text { ASSETS } & \text { LIAB. } \
\text { Reserves }+\$ 10 && \text { U.S. Gov't } & \text { Bank Reserves } \
\text { U.S. Gov't } && \text { Sec. }+\$ 10 & +\$ 10\
\text { Securities - \$10 }
\end{array}$
-After the transaction in Table 13-1 is completed, what happens to actual reserves, required reserves, and excess reserves? Assume the required reserve ratio is 25 percent.

Accepted Answer

A)  Actual reserves increase by $10 million, required reserves increase $2.5 million, and excess reserves increase by $7.5 million. 
B)  Actual reserves decrease by $10 million, required reserves decrease $2.5 million, and excess reserves decrease by $7.5 million. 
C)  Actual reserves increase by $10 million, required reserves are unchanged, and excess reserves increase by $10 million. 
D)  Actual reserves decrease by $10 million, required reserves decrease by $10 million, and excess reserves are unchanged. 
A)  Actual reserves increase by $10 million, required reserves increase $2.5 million, and excess reserves increase by $7.5 million. 
B)  Actual reserves decrease by $10 million, required reserves decrease $2.5 million, and excess reserves decrease by $7.5 million. 
C)  Actual reserves increase by $10 million, required reserves are unchanged, and excess reserves increase by $10 million. 
D)  Actual reserves decrease by $10 million, required reserves decrease by $10 million, and excess reserves are unchanged.

Question 20

An increase in the average price level will lead to a decrease in the demand for reserves.

Accepted Answer

A) True 
 B)False

Exam 30: Monetary Policy: Conventional and Unconventional

Which of the following phrases indicates that income is being spoken of?

The principal objective of the Federal Reserve System is to

When someone asks how much money you made this year, they are using the term "money" correctly.

At higher interest rates, banks will want to hold more reserves.

Define the following terms and explain their importance to the study of macroeconomics. a.central bank b.Federal Open Market Committee c.supply of money d.monetary policy

If the Fed's open market operations expand the money supply, one can expect

Money supply is to income as

If the Fed buys more bonds from the public, and increases the price it is willing to pay for the bonds, what will happen to interest rates?

Reserves demanded varies

Assume the required reserve ratio is 20 percent and the FOMC orders an open market purchase of $100 million in government securities from member banks.If the oversimplified money multiplier is assumed, then the money supply will

The correct chain of causation illustrating the changes caused by monetary policy is

The Federal Reserve Bank was modeled after the European Central Bank.

Figure 13-1 -In Figure 13-1, which panel shows the effect of a recession on the interest rate?

In the Keynesian causal chain, changes in GDP cause changes in the level of interest rates.

The Federal Reserve System is a(n)

The Fed is unlike other central banks in that it

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

The demand for reserves depends on income and the price level.

An increase in the average price level will lead to a decrease in the demand for reserves.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

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

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