Question 1

If the FOMC orders the sale of T-bills in the open market,then bank reserves are

Accepted Answer

A)  decreased, but the money supply will remain unchanged. 
B)  decreased, and a multiple contraction of the money supply will occur. 
C)  increased, but the money supply will remain unchanged. 
D)  increased, and a multiple expansion of the money supply will occur. 
A)  decreased, but the money supply will remain unchanged. 
B)  decreased, and a multiple contraction of the money supply will occur. 
C)  increased, but the money supply will remain unchanged. 
D)  increased, and a multiple expansion of the money supply will occur.

Question 2

The opportunity cost of holding excess reserves will be lower at an 8 percent federal funds rate in comparison to a 10 percent federal funds rate.

Accepted Answer

A) True 
 B)False

Question 3

In Latin America,countries like Brazil and Mexico have found it necessary to grant their central banks more independence in order to

Accepted Answer

A)  maintain higher levels of political stability. 
B)  promote economic growth and employment. 
C)  counteract high rates of inflation. 
D)  deal with the consequences of globalization. 
A)  maintain higher levels of political stability. 
B)  promote economic growth and employment. 
C)  counteract high rates of inflation. 
D)  deal with the consequences of globalization.

Question 4

The Federal Reserve System was established by Congress in 1914

Accepted Answer

A)  as a result of a breakthrough in economic theory. 
B)  against significant opposition from the banking sector. 
C)  because of the need for a central bank. 
D)  as the world's first central bank. 
A)  as a result of a breakthrough in economic theory. 
B)  against significant opposition from the banking sector. 
C)  because of the need for a central bank. 
D)  as the world's first central bank.

Question 5

Interest rates declined in 2007.What happened to bond prices during this time?

Accepted Answer

A)  They were unchanged. 
B)  They increased. 
C)  They decreased. 
D)  Not enough data to answer. 
A)  They were unchanged. 
B)  They increased. 
C)  They decreased. 
D)  Not enough data to answer.

Question 6

If the Federal Open Market Committee decides to expand the money supply,then it will

Accepted Answer

A)  raise the discount rate to member banks. 
B)  issue directions to purchase government securities, thus putting more reserves in member banks. 
C)  issue directions to sell government securities, thus taking reserves from member banks. 
D)  order new Federal Reserve notes delivered to member banks. 
A)  raise the discount rate to member banks. 
B)  issue directions to purchase government securities, thus putting more reserves in member banks. 
C)  issue directions to sell government securities, thus taking reserves from member banks. 
D)  order new Federal Reserve notes delivered to member banks.

Question 7

The concept of "lender of last resort" is that when

Accepted Answer

A)  lending decreases, the Fed will be the last to resort to higher interest rates. 
B)  borrowing increases, the Fed will be the last to increase lending. 
C)  commercial banks are hesitant to lend, the Fed will step in and increase reserves. 
D)  a borrower has tried everyone else, the Fed will lend directly to them. 
A)  lending decreases, the Fed will be the last to resort to higher interest rates. 
B)  borrowing increases, the Fed will be the last to increase lending. 
C)  commercial banks are hesitant to lend, the Fed will step in and increase reserves. 
D)  a borrower has tried everyone else, the Fed will lend directly to them.

Question 8

If interest rates increase,what will happen to the demand for reserves?

Accepted Answer

A)  It will shift outward. 
B)  It will shift inward. 
C)  Nothing, the economy will move to a new quantity demanded. 
D)  It depends on what happens to prices. 
A)  It will shift outward. 
B)  It will shift inward. 
C)  Nothing, the economy will move to a new quantity demanded. 
D)  It depends on what happens to prices.

Question 9

We should expect to see home construction activity decrease when interest rates increase.

Accepted Answer

A) True 
 B)False

Question 10

The creation of new bank reserves could lead to a multiple increase in the money supply.

Accepted Answer

A) True 
 B)False

Question 11

In its original role as "lender of last resort" the Fed was supposed to

Accepted Answer

A)  lend money to people in regions without banks. 
B)  lend money to developing nations. 
C)  keep the money supply from drying up during financial panics. 
D)  provide mortgage lending to returning soldiers. 
A)  lend money to people in regions without banks. 
B)  lend money to developing nations. 
C)  keep the money supply from drying up during financial panics. 
D)  provide mortgage lending to returning soldiers.

Question 12

Which of the following were not actions taken by the Federal Reserve in order to stimulate the economy during the recession of 2007-2009?

Accepted Answer

A)  decreasing the discount rate 
B)  suspending trading on the major stock exchanges 
C)  massive lending to banks 
D)  open market purchases of assets other than Treasury bills 
A)  decreasing the discount rate 
B)  suspending trading on the major stock exchanges 
C)  massive lending to banks 
D)  open market purchases of assets other than Treasury bills

Question 13

Which of the following will increase interest rates in the short run?

Accepted Answer

A)  an decrease in reserve requirements 
B)  open market sales by the Fed 
C)  a decrease in real GDP 
D)  an decrease in the price level 
A)  an decrease in reserve requirements 
B)  open market sales by the Fed 
C)  a decrease in real GDP 
D)  an decrease in the price level

Question 14

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 15

As a knowledgeable investor in 2007,you should have realized that as interest rates fell,bond prices would

Accepted Answer

A)  also fall. 
B)  rise. 
C)  become more volatile, like stock prices. 
D)  fall but not by as much as stock prices. 
A)  also fall. 
B)  rise. 
C)  become more volatile, like stock prices. 
D)  fall but not by as much as stock prices.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

If the Fed wants to reduce banks' reserves,it can

Accepted Answer

A)  buy securities in the open market. 
B)  lower the reserve ratio. 
C)  lower the federal funds rate. 
D)  raise the discount rate. 
A)  buy securities in the open market. 
B)  lower the reserve ratio. 
C)  lower the federal funds rate. 
D)  raise the discount rate.

Question 18

The Federal Open Market Committee oversees the money supply through the purchase and sale of government securities.

Accepted Answer

A) True 
 B)False

Question 19

The Federal Open Market Committee meets

Accepted Answer

A)  once a month. 
B)  eight times a year. 
C)  four times a year. 
D)  semi-annually. 
A)  once a month. 
B)  eight times a year. 
C)  four times a year. 
D)  semi-annually.

Question 20

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

If the FOMC orders the sale of T-bills in the open market,then bank reserves are

The opportunity cost of holding excess reserves will be lower at an 8 percent federal funds rate in comparison to a 10 percent federal funds rate.

In Latin America,countries like Brazil and Mexico have found it necessary to grant their central banks more independence in order to

The Federal Reserve System was established by Congress in 1914

Interest rates declined in 2007.What happened to bond prices during this time?

If the Federal Open Market Committee decides to expand the money supply,then it will

The concept of "lender of last resort" is that when

If interest rates increase,what will happen to the demand for reserves?

We should expect to see home construction activity decrease when interest rates increase.

The creation of new bank reserves could lead to a multiple increase in the money supply.

In its original role as "lender of last resort" the Fed was supposed to

Which of the following were not actions taken by the Federal Reserve in order to stimulate the economy during the recession of 2007-2009?

Which of the following will increase interest rates in the short run?

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

As a knowledgeable investor in 2007,you should have realized that as interest rates fell,bond prices would

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

If the Fed wants to reduce banks' reserves,it can

The Federal Open Market Committee oversees the money supply through the purchase and sale of government securities.

The Federal Open Market Committee meets

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

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

Exam 13: Monetary Policy: Conventional and Unconventional

If the FOMC orders the sale of T-bills in the open market,then bank reserves are

The opportunity cost of holding excess reserves will be lower at an 8 percent federal funds rate in comparison to a 10 percent federal funds rate.

In Latin America,countries like Brazil and Mexico have found it necessary to grant their central banks more independence in order to

The Federal Reserve System was established by Congress in 1914

Interest rates declined in 2007.What happened to bond prices during this time?

If the Federal Open Market Committee decides to expand the money supply,then it will

The concept of "lender of last resort" is that when

If interest rates increase,what will happen to the demand for reserves?

We should expect to see home construction activity decrease when interest rates increase.

The creation of new bank reserves could lead to a multiple increase in the money supply.

In its original role as "lender of last resort" the Fed was supposed to

Which of the following were not actions taken by the Federal Reserve in order to stimulate the economy during the recession of 2007-2009?

Which of the following will increase interest rates in the short run?

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

As a knowledgeable investor in 2007,you should have realized that as interest rates fell,bond prices would

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

If the Fed wants to reduce banks' reserves,it can

The Federal Open Market Committee oversees the money supply through the purchase and sale of government securities.

The Federal Open Market Committee meets

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

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