Question 1

Critics of Fed independence argue that

Accepted Answer

A)  monetary policy and fiscal policy are necessarily inconsistent. 
B)  political control ensures low rates of inflation. 
C)  monetary policy run by specialists is inherently inflationary. 
D)  unelected officials are undemocratic. 
A)  monetary policy and fiscal policy are necessarily inconsistent. 
B)  political control ensures low rates of inflation. 
C)  monetary policy run by specialists is inherently inflationary. 
D)  unelected officials are undemocratic.

Question 2

Suppose that all banks maintain a 100 percent reserve ratio. If an individual deposits $ 3,000 of currency in a bank,

Accepted Answer

A)  the money supply is unaffected. 
B)  the money supply rises by more than $3,000. 
C)  the money supply rises by less than $3,000. 
D)  the money supply decreased by less than $3,000. 
A)  the money supply is unaffected. 
B)  the money supply rises by more than $3,000. 
C)  the money supply rises by less than $3,000. 
D)  the money supply decreased by less than $3,000.

Question 3

Explain how interest rates and bond prices are related to one another. Why is this important for monetary policy?

Accepted Answer

Interest rates and bond prices are inver

Question 4

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 5

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

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 6

What will happen to the demand for reserves if real GDP increases?

Accepted Answer

A)  It will shift outward. 
B)  It will shift inward. 
C)  It will remain unchanged. 
D)  It depends on what happens to interest rates. 
A)  It will shift outward. 
B)  It will shift inward. 
C)  It will remain unchanged. 
D)  It depends on what happens to interest rates.

Question 7

Most power in the Federal Reserve System is held by the

Accepted Answer

A)  president and Congress. 
B)  Secretary of the Treasury, who appoints the members of the Board of Governors. 
C)  Board of Governors of the system. 
D)  member banks of the system. 
A)  president and Congress. 
B)  Secretary of the Treasury, who appoints the members of the Board of Governors. 
C)  Board of Governors of the system. 
D)  member banks of the system.

Question 8

The Federal Reserve System is

Accepted Answer

A)  controlled by the Department of the Treasury. 
B)  the central bank for the United States. 
C)  completely similar to the Bank of England. 
D)  All of the above are correct. 
A)  controlled by the Department of the Treasury. 
B)  the central bank for the United States. 
C)  completely similar to the Bank of England. 
D)  All of the above are correct.

Question 9

If the Fed decides to sell T-bills, it increases the supply of T-bills. How will this affect the price of T-bills and the interest rate?

Accepted Answer

A)  T-bill prices fall and interest rates fall. 
B)  T-bill prices rise and interest rates rise. 
C)  T-bill prices rise and interest rates fall. 
D)  T-bill prices fall and interest rates rise. 
A)  T-bill prices fall and interest rates fall. 
B)  T-bill prices rise and interest rates rise. 
C)  T-bill prices rise and interest rates fall. 
D)  T-bill prices fall and interest rates rise.

Question 10

People are often heard saying, "She makes good money." An economic interpretation of this statement would be that

Accepted Answer

A)  she has an honest job. 
B)  she makes money that is not counterfeit. 
C)  she has a high income. 
D)  there is little inflation. 
A)  she has an honest job. 
B)  she makes money that is not counterfeit. 
C)  she has a high income. 
D)  there is little inflation.

Critics of Fed independence argue that

Suppose that all banks maintain a 100 percent reserve ratio. If an individual deposits $ 3,000 of currency in a bank,

Explain how interest rates and bond prices are related to one another. Why is this important for monetary policy?

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 rises?

What will happen to the demand for reserves if real GDP increases?

Most power in the Federal Reserve System is held by the

The Federal Reserve System is

If the Fed decides to sell T-bills, it increases the supply of T-bills. How will this affect the price of T-bills and the interest rate?

People are often heard saying, "She makes good money." An economic interpretation of this statement would be that

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

Contemporary Issues in the Us Economy

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Exam 29: Monetary Policy: Conventional and Unconventional

Critics of Fed independence argue that

Suppose that all banks maintain a 100 percent reserve ratio. If an individual deposits $ 3,000 of currency in a bank,

Explain how interest rates and bond prices are related to one another. Why is this important for monetary policy?

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 rises?

What will happen to the demand for reserves if real GDP increases?

Most power in the Federal Reserve System is held by the

The Federal Reserve System is

If the Fed decides to sell T-bills, it increases the supply of T-bills. How will this affect the price of T-bills and the interest rate?

People are often heard saying, "She makes good money." An economic interpretation of this statement would be that

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

Contemporary Issues in the Us Economy

Filters