Question 1

If the Fed decides to buy T-bills,it increases the demand for 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. C

Question 2

An open market purchase of T-bonds by the Fed causes the money supply to

Accepted Answer

A)  fall and bond prices to fall. 
B)  rise and bond prices to fall. 
C)  rise and bond prices to rise. 
D)  fall and bond prices to rise. 
A)  fall and bond prices to fall. 
B)  rise and bond prices to fall. 
C)  rise and bond prices to rise. 
D)  fall and bond prices to rise. C

Question 3

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. B

Question 4

What is the federal funds rate? What are the main determinants of the federal funds rate?

Accepted Answer

The federal funds rate is the interest r

Question 5

The money supply contracts when the Fed

Accepted Answer

A)  replaces old worn-out notes and bills. 
B)  borrows from the Treasury. 
C)  sells government securities. 
D)  purchases stocks from corporate businesses. 
A)  replaces old worn-out notes and bills. 
B)  borrows from the Treasury. 
C)  sells government securities. 
D)  purchases stocks from corporate businesses.

Question 6

Figure 13-1
  
-In Figure 13-1,which panel shows the effect of an expansionary monetary policy 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 7

Technically,the Federal Reserve district banks are corporations whose stockholders are the

Accepted Answer

A)  state governments in each district. 
B)  citizens of the United States. 
C)  Departments of Treasury and Commerce. 
D)  member banks. 
A)  state governments in each district. 
B)  citizens of the United States. 
C)  Departments of Treasury and Commerce. 
D)  member banks.

Question 8

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 9

Which of the following is an income number?

Accepted Answer

A)  M1 
B)  M2 
C)  GDP 
D)  cash 
A)  M1 
B)  M2 
C)  GDP 
D)  cash

Question 10

When interest rates decrease,banks will normally

Accepted Answer

A)  increase lending, but decrease deposits and the money supply. 
B)  increase lending, deposits, and the money supply. 
C)  decrease lending, but increase deposits and the money supply. 
D)  decrease lending, deposits, and the money supply. 
A)  increase lending, but decrease deposits and the money supply. 
B)  increase lending, deposits, and the money supply. 
C)  decrease lending, but increase deposits and the money supply. 
D)  decrease lending, deposits, and the money supply.

Question 11

To decrease the money supply,the Fed purchases government securities,which decreases government spending.

Accepted Answer

A) True 
 B)False

Question 12

Part of the controversy about Fed independence include(s)

Accepted Answer

A)  the goal to bring all macroeconomic policy under the direct control of the president. 
B)  the appropriate role of the Fed in policy making. 
C)  how to make the Fed more powerful than other central banks. 
D)  All of the above are correct. 
A)  the goal to bring all macroeconomic policy under the direct control of the president. 
B)  the appropriate role of the Fed in policy making. 
C)  how to make the Fed more powerful than other central banks. 
D)  All of the above are correct.

Question 13

In 2007,as stock prices in general were falling,many investors began switching their funds into purchasing bonds.Surveys suggest that many of these investors did not understand the basic relationship between bond prices and interest rates.Using a numerical example,illustrate how an increase in the demand for bonds would affect the interest rate paid on bonds.

Accepted Answer

If there is an increase in the demand fo

Question 14

An increase in the reserve supply

Accepted Answer

A)  will result in inflation if the unemployment rate is high. 
B)  causes interest rates to rise. 
C)  shifts the aggregate demand curve inward. 
D)  will probably cause inflation if the economy is at potential GDP. 
A)  will result in inflation if the unemployment rate is high. 
B)  causes interest rates to rise. 
C)  shifts the aggregate demand curve inward. 
D)  will probably cause inflation if the economy is at potential GDP.

Question 15

The quantity of reserves demanded decreases as the federal funds rate rises because

Accepted Answer

A)  people want more liquid assets as the federal funds rate rises. 
B)  the price of bonds rise as the federal funds rate rises. 
C)  the opportunity cost of holding excess reserves increases as the federal funds rate rises. 
D)  people want more money to invest as the federal funds rate rises. 
A)  people want more liquid assets as the federal funds rate rises. 
B)  the price of bonds rise as the federal funds rate rises. 
C)  the opportunity cost of holding excess reserves increases as the federal funds rate rises. 
D)  people want more money to invest as the federal funds rate rises.

Question 16

The Federal Reserve Open Market Committee includes the seven members of the Board of Governors,presidents of five of the twelve district banks,and the Secretary of the Treasury.

Accepted Answer

A) True 
 B)False

Question 17

Unconventional monetary policies include massive lending to banks and open-market purchases of assets other than Treasury bills.

Accepted Answer

A) True 
 B)False

Question 18

When the Fed purchases government securities from a commercial bank,the bank

Accepted Answer

A)  loses its ability to make loans. 
B)  automatically becomes poorer. 
C)  loses equity in the Fed. 
D)  receives reserves that can be loaned out. 
A)  loses its ability to make loans. 
B)  automatically becomes poorer. 
C)  loses equity in the Fed. 
D)  receives reserves that can be loaned out.

Question 19

Who is considered to be the most powerful man in the economic world by many observers?

Accepted Answer

A)  Federal Reserve chairman 
B)  EU Central Bank President 
C)  Director-General of the WTO 
D)  World Bank President 
A)  Federal Reserve chairman 
B)  EU Central Bank President 
C)  Director-General of the WTO 
D)  World Bank President

Question 20

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent,what would happen to the money supply?

Accepted Answer

A)  It would decrease. 
B)  It would increase. 
C)  It would remain unchanged. 
D)  It depends on the value of interest rates. 
A)  It would decrease. 
B)  It would increase. 
C)  It would remain unchanged. 
D)  It depends on the value of interest rates.

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

An open market purchase of T-bonds by the Fed causes the money supply to

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

What is the federal funds rate? What are the main determinants of the federal funds rate?

The money supply contracts when the Fed

Figure 13-1 -In Figure 13-1,which panel shows the effect of an expansionary monetary policy on the interest rate?

Technically,the Federal Reserve district banks are corporations whose stockholders are the

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

Which of the following is an income number?

When interest rates decrease,banks will normally

To decrease the money supply,the Fed purchases government securities,which decreases government spending.

Part of the controversy about Fed independence include(s)

An increase in the reserve supply

The quantity of reserves demanded decreases as the federal funds rate rises because

The Federal Reserve Open Market Committee includes the seven members of the Board of Governors,presidents of five of the twelve district banks,and the Secretary of the Treasury.

Unconventional monetary policies include massive lending to banks and open-market purchases of assets other than Treasury bills.

When the Fed purchases government securities from a commercial bank,the bank

Who is considered to be the most powerful man in the economic world by many observers?

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent,what would happen to the money supply?

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

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Exam 13: Monetary Policy: Conventional and Unconventional

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

An open market purchase of T-bonds by the Fed causes the money supply to

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

What is the federal funds rate? What are the main determinants of the federal funds rate?

The money supply contracts when the Fed

Figure 13-1 -In Figure 13-1,which panel shows the effect of an expansionary monetary policy on the interest rate?

Technically,the Federal Reserve district banks are corporations whose stockholders are the

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

Which of the following is an income number?

When interest rates decrease,banks will normally

To decrease the money supply,the Fed purchases government securities,which decreases government spending.

Part of the controversy about Fed independence include(s)

An increase in the reserve supply

The quantity of reserves demanded decreases as the federal funds rate rises because

The Federal Reserve Open Market Committee includes the seven members of the Board of Governors,presidents of five of the twelve district banks,and the Secretary of the Treasury.

Unconventional monetary policies include massive lending to banks and open-market purchases of assets other than Treasury bills.

When the Fed purchases government securities from a commercial bank,the bank

Who is considered to be the most powerful man in the economic world by many observers?

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent,what would happen to the money supply?

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

Filters