Question 1

In 2004, the FOMC became concerned about _____

Accepted Answer

A)  inflationary pressures. 
B)  weak economic growth. 
C)  rising unemployment. 
D)  waning consumer confidence. 
E)  weak capital spending. 
A)  inflationary pressures. 
B)  weak economic growth. 
C)  rising unemployment. 
D)  waning consumer confidence. 
E)  weak capital spending. A

Question 2

According to the equation of exchange, if the amount of money in an economy multiplied by the velocity of money equals 800 million dollars, then this economy's _____

Accepted Answer

A)  real GDP equals $800 million. 
B)  nominal GDP equals $800 million. 
C)  real GDP equals $800 million times the price level. 
D)  nominal GDP equals $800 million times the price level. 
E)  price level equals $800. 
A)  real GDP equals $800 million. 
B)  nominal GDP equals $800 million. 
C)  real GDP equals $800 million times the price level. 
D)  nominal GDP equals $800 million times the price level. 
E)  price level equals $800. B

Question 3

In the long run, an increase in aggregate demand _____

Accepted Answer

A)  increases the price level and real output, but the effect on the price level is larger. 
B)  increases the price level and real output, but the effect on output is larger. 
C)  affects only real output. 
D)  affects only the price level. 
E)  affects neither the price level nor real output. 
A)  increases the price level and real output, but the effect on the price level is larger. 
B)  increases the price level and real output, but the effect on output is larger. 
C)  affects only real output. 
D)  affects only the price level. 
E)  affects neither the price level nor real output. D

Question 4

The Fed can close a recessionary gap by _____

Accepted Answer

A)  increasing fiscal expenditure. 
B)  increasing taxes. 
C)  decreasing taxes. 
D)  selling U.S. government bonds. 
E)  lowering the interest rate. 
A)  increasing fiscal expenditure. 
B)  increasing taxes. 
C)  decreasing taxes. 
D)  selling U.S. government bonds. 
E)  lowering the interest rate.

Question 5

The demand for money is a relationship between _____

Accepted Answer

A)  the price level and the amount of cyclical unemployment. 
B)  the price level and the actual output produced in an economy. 
C)  the interest rate and how much money people choose to hold. 
D)  the interest rate and how much money people earn during a certain time period. 
E)  the interest rate and the rate of inflation. 
A)  the price level and the amount of cyclical unemployment. 
B)  the price level and the actual output produced in an economy. 
C)  the interest rate and how much money people choose to hold. 
D)  the interest rate and how much money people earn during a certain time period. 
E)  the interest rate and the rate of inflation.

Question 6

Most policy makers agree that in the long run, changes in the money supply influence _____

Accepted Answer

A)  the price level, inflation, and employment. 
B)  the real interest rate and aggregate demand. 
C)  the planned investment expenditure. 
D)  the exchange rate. 
E)  the potential GDP and unemployment. 
A)  the price level, inflation, and employment. 
B)  the real interest rate and aggregate demand. 
C)  the planned investment expenditure. 
D)  the exchange rate. 
E)  the potential GDP and unemployment.

Question 7

Quantitative easing is the opening of the discount window by the Fed.

Accepted Answer

A) True 
 B)False

Question 8

An increase in investment can lead to a greater increase in aggregate demand if the value of the spending multiplier is _____

Accepted Answer

A)  greater than 1. 
B)  less than 1 but more than zero. 
C)  negative. 
D)  exactly equal to zero. 
E)  exactly equal to one. 
A)  greater than 1. 
B)  less than 1 but more than zero. 
C)  negative. 
D)  exactly equal to zero. 
E)  exactly equal to one.

Question 9

In the money market, if the money supply decreases, the opportunity cost of holding money _____

Accepted Answer

A)  decreases and the quantity of money demanded increases. 
B)  decreases and the quantity of money demanded falls. 
C)  increases and the quantity of money demanded falls. 
D)  increases but the quantity of money demanded remains unchanged. 
E)  increases and the quantity of money demanded also increases. 
A)  decreases and the quantity of money demanded increases. 
B)  decreases and the quantity of money demanded falls. 
C)  increases and the quantity of money demanded falls. 
D)  increases but the quantity of money demanded remains unchanged. 
E)  increases and the quantity of money demanded also increases.

Question 10

At a given point in time, if the demand for money increases _____

Accepted Answer

A)  the interest rate will fall. 
B)  there will be a movement downward along the money demand curve. 
C)  there will be a movement upward along the money demand curve. 
D)  there will be a rightward shift of the money demand curve. 
E)  there will be a leftward shift of the money demand curve. 
A)  the interest rate will fall. 
B)  there will be a movement downward along the money demand curve. 
C)  there will be a movement upward along the money demand curve. 
D)  there will be a rightward shift of the money demand curve. 
E)  there will be a leftward shift of the money demand curve.

Question 11

If the Fed purchases U.S. government securities, gross domestic product _____

Accepted Answer

A)  increases because the resulting increase in the interest rate leads to a decrease in investment. 
B)  increases because the resulting decrease in the interest rate leads to an increase in investment. 
C)  decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D)  decreases because the resulting increase in the interest rate leads to an increase in investment. 
E)  decreases because the resulting decrease in the interest rate leads to an increase in investment. 
A)  increases because the resulting increase in the interest rate leads to a decrease in investment. 
B)  increases because the resulting decrease in the interest rate leads to an increase in investment. 
C)  decreases because the resulting increase in the interest rate leads to a decrease in investment. 
D)  decreases because the resulting increase in the interest rate leads to an increase in investment. 
E)  decreases because the resulting decrease in the interest rate leads to an increase in investment.

Question 12

In terms of unemployment, the Fed currently sees an unemployment rate of _____ as sustainable in the long run.

Accepted Answer

A)  0.5-0.8 percent. 
B)  1.5-2.0 percent. 
C)  2.0-3.8 percent. 
D)  3.5-4.5 percent. 
E)  4.5-4.8 percent. 
A)  0.5-0.8 percent. 
B)  1.5-2.0 percent. 
C)  2.0-3.8 percent. 
D)  3.5-4.5 percent. 
E)  4.5-4.8 percent.

Question 13

All other things constant, when the interest rate increases, _____

Accepted Answer

A)  the demand for investment curve shifts to the right. 
B)  the demand for investment curve shifts to the left. 
C)  there is a movement downward along the demand for investment curve. 
D)  there is a movement upward along the demand for investment curve. 
E)  GDP increases. 
A)  the demand for investment curve shifts to the right. 
B)  the demand for investment curve shifts to the left. 
C)  there is a movement downward along the demand for investment curve. 
D)  there is a movement upward along the demand for investment curve. 
E)  GDP increases.

Question 14

If interest rates are to remain constant, the money supply should change _____

Accepted Answer

A)  in the opposite direction to a change in aggregate demand. 
B)  in the same direction as a change in money demand. 
C)  only when investment changes. 
D)  only when the demand for money decreases. 
E)  only when the inflation rate changes. 
A)  in the opposite direction to a change in aggregate demand. 
B)  in the same direction as a change in money demand. 
C)  only when investment changes. 
D)  only when the demand for money decreases. 
E)  only when the inflation rate changes.

Question 15

The Fed purchases of long-term assets to stabilize financial markets, reduce long-term interest rates, and improve the investment environment are called _____

Accepted Answer

A)  structural adjustments. 
B)  financial strengthening. 
C)  quantitative easing. 
D)  inflation targeting. 
E)  stress testing. 
A)  structural adjustments. 
B)  financial strengthening. 
C)  quantitative easing. 
D)  inflation targeting. 
E)  stress testing.

Question 16

The money demand curve will shift when there is a change in the _____

Accepted Answer

A)  unemployment rate. 
B)  inflation rate. 
C)  money supply. 
D)  nominal interest rate. 
E)  price level. 
A)  unemployment rate. 
B)  inflation rate. 
C)  money supply. 
D)  nominal interest rate. 
E)  price level.

Question 17

Exhibit 15.2
  
-Exhibit 15.2 shows equilibrium in a money market. If S is the supply curve, the equilibrium interest rate and quantity of money will be _____

Accepted Answer

A)  r and m, respectively. 
B)  r* and m*, respectively. 
C)  r' and m', respectively. 
D)  r and m', respectively. 
E)  r' and m*, respectively. 
A)  r and m, respectively. 
B)  r* and m*, respectively. 
C)  r' and m', respectively. 
D)  r and m', respectively. 
E)  r' and m*, respectively.

Question 18

For a given money demand curve, an increase in money supply _____

Accepted Answer

A)  drives up the real interest rate. 
B)  lowers the opportunity cost of holding money. 
C)  decreases the quantity of money demanded. 
D)  drives down the price level in an economy. 
E)  contracts the total output produced in an economy. 
A)  drives up the real interest rate. 
B)  lowers the opportunity cost of holding money. 
C)  decreases the quantity of money demanded. 
D)  drives down the price level in an economy. 
E)  contracts the total output produced in an economy.

Question 19

In the short run, a decrease in the money supply will lead to a(n) _____

Accepted Answer

A)  decrease in Gross Domestic Product. 
B)  increase in the price level. 
C)  increase in aggregate demand. 
D)  increase in the demand for money. 
E)  decrease in the market interest rate. 
A)  decrease in Gross Domestic Product. 
B)  increase in the price level. 
C)  increase in aggregate demand. 
D)  increase in the demand for money. 
E)  decrease in the market interest rate.

Question 20

According to the equation of exchange, if nominal GDP equals $6 trillion and the money supply equals $1 trillion, the velocity of money _____

Accepted Answer

A)  must be 6. 
B)  must be 1/6. 
C)  must be 6 trillion. 
D)  must be 1/6 trillion. 
E)  cannot be determined unless we know the price level. 
A)  must be 6. 
B)  must be 1/6. 
C)  must be 6 trillion. 
D)  must be 1/6 trillion. 
E)  cannot be determined unless we know the price level.

In 2004, the FOMC became concerned about _____

According to the equation of exchange, if the amount of money in an economy multiplied by the velocity of money equals 800 million dollars, then this economy's _____

In the long run, an increase in aggregate demand _____

The Fed can close a recessionary gap by _____

The demand for money is a relationship between _____

Most policy makers agree that in the long run, changes in the money supply influence _____

Quantitative easing is the opening of the discount window by the Fed.

An increase in investment can lead to a greater increase in aggregate demand if the value of the spending multiplier is _____

In the money market, if the money supply decreases, the opportunity cost of holding money _____

At a given point in time, if the demand for money increases _____

If the Fed purchases U.S. government securities, gross domestic product _____

In terms of unemployment, the Fed currently sees an unemployment rate of _____ as sustainable in the long run.

All other things constant, when the interest rate increases, _____

If interest rates are to remain constant, the money supply should change _____

The Fed purchases of long-term assets to stabilize financial markets, reduce long-term interest rates, and improve the investment environment are called _____

The money demand curve will shift when there is a change in the _____

Exhibit 15.2 -Exhibit 15.2 shows equilibrium in a money market. If S is the supply curve, the equilibrium interest rate and quantity of money will be _____

For a given money demand curve, an increase in money supply _____

In the short run, a decrease in the money supply will lead to a(n) _____

According to the equation of exchange, if nominal GDP equals $6 trillion and the money supply equals $1 trillion, the velocity of money _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 15: Monetary Theory and Policy.

In 2004, the FOMC became concerned about _____

According to the equation of exchange, if the amount of money in an economy multiplied by the velocity of money equals 800 million dollars, then this economy's _____

In the long run, an increase in aggregate demand _____

The Fed can close a recessionary gap by _____

The demand for money is a relationship between _____

Most policy makers agree that in the long run, changes in the money supply influence _____

Quantitative easing is the opening of the discount window by the Fed.

An increase in investment can lead to a greater increase in aggregate demand if the value of the spending multiplier is _____

In the money market, if the money supply decreases, the opportunity cost of holding money _____

At a given point in time, if the demand for money increases _____

If the Fed purchases U.S. government securities, gross domestic product _____

In terms of unemployment, the Fed currently sees an unemployment rate of _____ as sustainable in the long run.

All other things constant, when the interest rate increases, _____

If interest rates are to remain constant, the money supply should change _____

The Fed purchases of long-term assets to stabilize financial markets, reduce long-term interest rates, and improve the investment environment are called _____

The money demand curve will shift when there is a change in the _____

Exhibit 15.2 -Exhibit 15.2 shows equilibrium in a money market. If S is the supply curve, the equilibrium interest rate and quantity of money will be _____

For a given money demand curve, an increase in money supply _____

In the short run, a decrease in the money supply will lead to a(n) _____

According to the equation of exchange, if nominal GDP equals $6 trillion and the money supply equals $1 trillion, the velocity of money _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters