Question 1

The federal funds rate is the interest rate that ________.

Accepted Answer

A)  banks use to make loans to one another 
B)  the Fed uses to lend money to households 
C)  the Fed uses to lend money to business firms 
D)  banks use to lend money to the Fed 
A)  banks use to make loans to one another 
B)  the Fed uses to lend money to households 
C)  the Fed uses to lend money to business firms 
D)  banks use to lend money to the Fed

Question 2

Countercyclical policies are used exclusively to target a reduction in the effects of a recession.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true?

Accepted Answer

A)  Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor demand curve to the left. 
B)  Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor demand curve to the right. 
C)  Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor supply curve to the left. 
D)  Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor supply curve to the right. 
A)  Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor demand curve to the left. 
B)  Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor demand curve to the right. 
C)  Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor supply curve to the left. 
D)  Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor supply curve to the right.

Question 4

If the central bank wants to reduce the effects of a recession,it would adopt a(n)________.

Accepted Answer

A)  expansionary fiscal policy 
B)  contractionary monetary policy 
C)  contractionary fiscal policy 
D)  expansionary monetary policy 
A)  expansionary fiscal policy 
B)  contractionary monetary policy 
C)  contractionary fiscal policy 
D)  expansionary monetary policy

Question 5

The central bank of Baltonia decided to lower the interest rate that commercial banks use to make loans to one another when the growth rate of Baltonia's output fell.What will be the effect of this policy on Baltonia's economy?

Accepted Answer

If the central bank of Baltonia decides

Question 6

What will be the effect of a tax cut on consumption if consumption offers diminishing returns?

Accepted Answer

If consumption offers diminishing return

Question 7

If the Fed wants to lower the federal funds rate through open market operations,it will ________.

Accepted Answer

A)  sell bonds 
B)  buy bonds 
C)  increase the quantity of required reserves 
D)  increase the interest rate paid on borrowed reserves held at the Fed 
A)  sell bonds 
B)  buy bonds 
C)  increase the quantity of required reserves 
D)  increase the interest rate paid on borrowed reserves held at the Fed

Question 8

An increase in government expenditures leads to a(n)________ in the growth rate of real GDP and a ________ shift of the labor demand curve.

Accepted Answer

A)  decrease; right 
B)  increase; right 
C)  increase; left 
D)  decrease; left 
A)  decrease; right 
B)  increase; right 
C)  increase; left 
D)  decrease; left

Question 9

If the nominal interest rate is ________ and the inflation rate is ________,the real interest rate is positive.

Accepted Answer

A)  zero; positive 
B)  zero; negative 
C)  negative; negative 
D)  negative; zero 
A)  zero; positive 
B)  zero; negative 
C)  negative; negative 
D)  negative; zero

Question 10

Which of the following happens if long-term real interest rates fall?

Accepted Answer

A)  The prices of long-term bonds fall. 
B)  Imports increase. 
C)  Employment opportunities increase. 
D)  The demand for loans falls. 
A)  The prices of long-term bonds fall. 
B)  Imports increase. 
C)  Employment opportunities increase. 
D)  The demand for loans falls.

Question 11

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A.
  
-Refer to the scenario above.After this transaction,the Fed's total assets equal ________.

Accepted Answer

A)  $790 million 
B)  $800 million 
C)  $810 million 
D)  $820 million 
A)  $790 million 
B)  $800 million 
C)  $810 million 
D)  $820 million

Question 12

If the central bank of a country responds to economic contractions by adopting an expansionary monetary policy,________.

Accepted Answer

A)  interest rates will increase 
B)  access to credit will increase 
C)  government spending will fall 
D)  tax rates will increase 
A)  interest rates will increase 
B)  access to credit will increase 
C)  government spending will fall 
D)  tax rates will increase

Question 13

The Bank of Romovia,which is the highest financial institution in Romovia,has bought treasury bonds worth $2.2 billion from a private bank.How will this transaction affect the balance sheets of the private bank and the Bank of Romovia?

Accepted Answer

The private bank will have $2.2 billion

Question 14

An increase in reserves held by the Fed ________.

Accepted Answer

A)  reduces the federal funds interest rate 
B)  reduces the price level 
C)  increases the tax rates 
D)  increases unemployment 
A)  reduces the federal funds interest rate 
B)  reduces the price level 
C)  increases the tax rates 
D)  increases unemployment

Question 15

Briefly explain what specific details the Fed outlined in the policy rule from December 2012.

Accepted Answer

The policy rule linked changes in the fe

Question 16

Which of the following policy combinations was used by the government during the financial crisis of 2007-2009 in the United States?

Accepted Answer

A)  Income tax rates were increased, and payroll taxes were reduced. 
B)  Payroll tax rates were increased, and government spending was reduced. 
C)  The federal funds rate was decreased, and the quantity of required reserves was increased. 
D)  A combination of both fiscal and monetary policies was used. 
A)  Income tax rates were increased, and payroll taxes were reduced. 
B)  Payroll tax rates were increased, and government spending was reduced. 
C)  The federal funds rate was decreased, and the quantity of required reserves was increased. 
D)  A combination of both fiscal and monetary policies was used.

Question 17

A countercyclical policy used to combat the effects of recession would shift the labor demand curve exactly back to its pre-recession level in an economy with downwardly rigid wages.

Accepted Answer

A) True 
 B)False

Question 18

The long-term expected real interest rate is the long-term nominal interest rate ________.

Accepted Answer

A)  minus the long-term expected inflation rate 
B)  plus the long-term expected inflation rate 
C)  divided by the long-term expected inflation rate 
D)  multiplied by the long-term expected inflation rate 
A)  minus the long-term expected inflation rate 
B)  plus the long-term expected inflation rate 
C)  divided by the long-term expected inflation rate 
D)  multiplied by the long-term expected inflation rate

Question 19

If a $10 increase in government expenditure produces a change of $17 in GDP,the value of the government expenditure multiplier is ________.

Accepted Answer

A)  1.7 
B)  7 
C)  27 
D)  170 
A)  1.7 
B)  7 
C)  27 
D)  170

Question 20

Which of the following is likely to happen if the government lowers tax rates?

Accepted Answer

A)  Unemployment will increase. 
B)  Consumption will increase. 
C)  Investment will decrease. 
D)  Price level will fall. 
A)  Unemployment will increase. 
B)  Consumption will increase. 
C)  Investment will decrease. 
D)  Price level will fall.

The federal funds rate is the interest rate that ________.

Countercyclical policies are used exclusively to target a reduction in the effects of a recession.

Which of the following statements is true?

If the central bank wants to reduce the effects of a recession,it would adopt a(n)________.

The central bank of Baltonia decided to lower the interest rate that commercial banks use to make loans to one another when the growth rate of Baltonia's output fell.What will be the effect of this policy on Baltonia's economy?

What will be the effect of a tax cut on consumption if consumption offers diminishing returns?

If the Fed wants to lower the federal funds rate through open market operations,it will ________.

An increase in government expenditures leads to a(n) in the growth rate of real GDP and a shift of the labor demand curve.

If the nominal interest rate is and the inflation rate is ,the real interest rate is positive.

Which of the following happens if long-term real interest rates fall?

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A. -Refer to the scenario above.After this transaction,the Fed's total assets equal ________.

If the central bank of a country responds to economic contractions by adopting an expansionary monetary policy,________.

The Bank of Romovia,which is the highest financial institution in Romovia,has bought treasury bonds worth $2.2 billion from a private bank.How will this transaction affect the balance sheets of the private bank and the Bank of Romovia?

An increase in reserves held by the Fed ________.

Briefly explain what specific details the Fed outlined in the policy rule from December 2012.

Which of the following policy combinations was used by the government during the financial crisis of 2007-2009 in the United States?

A countercyclical policy used to combat the effects of recession would shift the labor demand curve exactly back to its pre-recession level in an economy with downwardly rigid wages.

The long-term expected real interest rate is the long-term nominal interest rate ________.

If a $10 increase in government expenditure produces a change of $17 in GDP,the value of the government expenditure multiplier is ________.

Which of the following is likely to happen if the government lowers tax rates?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

Credit Markets

The Monetary System

Short-Run Fluctuations

Macroeconomics and International Trade

Open Economy Macroeconomics

Filters

Exam 13: Countercyclical Macroeconomic Policy

The federal funds rate is the interest rate that ________.

Countercyclical policies are used exclusively to target a reduction in the effects of a recession.

Which of the following statements is true?

If the central bank wants to reduce the effects of a recession,it would adopt a(n)________.

The central bank of Baltonia decided to lower the interest rate that commercial banks use to make loans to one another when the growth rate of Baltonia's output fell.What will be the effect of this policy on Baltonia's economy?

What will be the effect of a tax cut on consumption if consumption offers diminishing returns?

If the Fed wants to lower the federal funds rate through open market operations,it will ________.

An increase in government expenditures leads to a(n)________ in the growth rate of real GDP and a ________ shift of the labor demand curve.

If the nominal interest rate is ________ and the inflation rate is ________,the real interest rate is positive.

Which of the following happens if long-term real interest rates fall?

Scenario: The following table shows the initial balance sheets of Bank A and the Fed. Suppose that the Fed then buys $10 million in bonds from Bank A. -Refer to the scenario above.After this transaction,the Fed's total assets equal ________.

If the central bank of a country responds to economic contractions by adopting an expansionary monetary policy,________.

The Bank of Romovia,which is the highest financial institution in Romovia,has bought treasury bonds worth $2.2 billion from a private bank.How will this transaction affect the balance sheets of the private bank and the Bank of Romovia?

An increase in reserves held by the Fed ________.

Briefly explain what specific details the Fed outlined in the policy rule from December 2012.

Which of the following policy combinations was used by the government during the financial crisis of 2007-2009 in the United States?

A countercyclical policy used to combat the effects of recession would shift the labor demand curve exactly back to its pre-recession level in an economy with downwardly rigid wages.

The long-term expected real interest rate is the long-term nominal interest rate ________.

If a $10 increase in government expenditure produces a change of $17 in GDP,the value of the government expenditure multiplier is ________.

Which of the following is likely to happen if the government lowers tax rates?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

Credit Markets

The Monetary System

Short-Run Fluctuations

Macroeconomics and International Trade

Open Economy Macroeconomics

Filters

An increase in government expenditures leads to a(n) in the growth rate of real GDP and a shift of the labor demand curve.

If the nominal interest rate is and the inflation rate is ,the real interest rate is positive.