Question 1

To stimulate aggregate demand, the Fed could

Accepted Answer

A)  Lower its policy interest rate 
B)  Use forward guidance to alter the path of the expected policy rate 
C)  Purchase long-term benchmark securities to compress the term premium 
D)  All of the above 
A)  Lower its policy interest rate 
B)  Use forward guidance to alter the path of the expected policy rate 
C)  Purchase long-term benchmark securities to compress the term premium 
D)  All of the above D

Question 2

Inflation would rise if

Accepted Answer

A)  Actual output exceeded potential output 
B)  Inflation expectations increased 
C)  Unemployment were below the NAIRU 
D)  All of the above 
A)  Actual output exceeded potential output 
B)  Inflation expectations increased 
C)  Unemployment were below the NAIRU 
D)  All of the above D

Question 3

If disinflation is taking place

Accepted Answer

A)  The level of actual output likely is below the level of potential output 
B)  The growth of actual output must be below the growth of potential output 
C)  The minimum wage has probably fallen 
D)  The unemployment rate is below the NAIRU 
A)  The level of actual output likely is below the level of potential output 
B)  The growth of actual output must be below the growth of potential output 
C)  The minimum wage has probably fallen 
D)  The unemployment rate is below the NAIRU A

Question 4

Outside the United States, the goal of monetary policy in industrial economies

Accepted Answer

A)  Stable prices (or low inflation) 
B)  A stable exchange rate 
C)  Maximum employment 
D)  Low interest rates 
A)  Stable prices (or low inflation) 
B)  A stable exchange rate 
C)  Maximum employment 
D)  Low interest rates

Question 5

If growth in the labor force is 1 percent, growth in labor productivity is 2 percent, and growth in prices is 2 percent, growth in potential (real) output will be

Accepted Answer

A)  3 percent 
B)  5 percent 
C)  1 percent 
D)  Cannot tell from the information provided 
A)  3 percent 
B)  5 percent 
C)  1 percent 
D)  Cannot tell from the information provided

Question 6

Setting the stage for the Great Moderation was

Accepted Answer

A)  Restrictive fiscal policy 
B)  Low and fairly steady inflation and inflation expectations 
C)  Coordinated international policies 
D)  Strong stock prices 
A)  Restrictive fiscal policy 
B)  Low and fairly steady inflation and inflation expectations 
C)  Coordinated international policies 
D)  Strong stock prices

Question 7

The Fed (and many other central banks) prefers to gauge inflation by looking at the core measure of inflation because

Accepted Answer

A)  This measure is biased downward 
B)  It is required to by statute 
C)  By removing volatile food and energy prices, the core measure better reflects underlying inflation 
D)  None of the above 
A)  This measure is biased downward 
B)  It is required to by statute 
C)  By removing volatile food and energy prices, the core measure better reflects underlying inflation 
D)  None of the above

Question 8

The statutory goal of monetary policy in the United States is

Accepted Answer

A)  Maximum employment 
B)  Moderate long-term interest rates 
C)  Stable prices 
D)  All of the above 
A)  Maximum employment 
B)  Moderate long-term interest rates 
C)  Stable prices 
D)  All of the above

Question 9

If actual output were to grow at nearly a 2.5 percent rate over the next three years, according to Okun's Law

Accepted Answer

A)  Unemployment would be rising 
B)  Unemployment would be falling 
C)  Unemployment would be stable 
D)  More information is needed 
A)  Unemployment would be rising 
B)  Unemployment would be falling 
C)  Unemployment would be stable 
D)  More information is needed

Question 10

Inflation will increase when

Accepted Answer

A)  Growth in aggregate demand exceeds growth in potential output and the level of output is above the level of potential output 
B)  Growth in aggregate demand falls short of growth in potential output and the level of output is above the level of potential output 
C)  Growth in aggregate demand exceeds the growth in potential output and the level of output is below the level of potential output 
D)  Both a and b 
A)  Growth in aggregate demand exceeds growth in potential output and the level of output is above the level of potential output 
B)  Growth in aggregate demand falls short of growth in potential output and the level of output is above the level of potential output 
C)  Growth in aggregate demand exceeds the growth in potential output and the level of output is below the level of potential output 
D)  Both a and b

Question 11

If actual output equals and grows with potential output

Accepted Answer

A)  Inflation will be stable 
B)  The unemployment rate will equal the NAIRU 
C)  Output will be growing at nearly a 2.5 percent rate 
D)  All of the above 
A)  Inflation will be stable 
B)  The unemployment rate will equal the NAIRU 
C)  Output will be growing at nearly a 2.5 percent rate 
D)  All of the above

To stimulate aggregate demand, the Fed could

Inflation would rise if

If disinflation is taking place

Outside the United States, the goal of monetary policy in industrial economies

If growth in the labor force is 1 percent, growth in labor productivity is 2 percent, and growth in prices is 2 percent, growth in potential (real) output will be

Setting the stage for the Great Moderation was

The Fed (and many other central banks) prefers to gauge inflation by looking at the core measure of inflation because

The statutory goal of monetary policy in the United States is

If actual output were to grow at nearly a 2.5 percent rate over the next three years, according to Okun's Law

Inflation will increase when

If actual output equals and grows with potential output

Introduction

Overview of the Financial System

The Special Role of Commercial Banks

Factors Affecting Yields

Principles of Portfolio Selection and Efficient Markets

The Money Market

The Bond Market

Securitization

The Mortgage Market

The Equity Market

Central Banking and the Federal Reserve

Monetary Policy: Challenges Faced by Policymakers

Financial Crises

The Foreign Exchange Market and Exchange Rate Regimes

Depository Institutions

The Pricing of Financial Assets

Mutual Funds

Hedge, Venture Capital, and Private Equity Funds

Large Institutional Investors

Filters

Exam 13: Monetary Policy: The Basics

To stimulate aggregate demand, the Fed could

Inflation would rise if

If disinflation is taking place

Outside the United States, the goal of monetary policy in industrial economies

If growth in the labor force is 1 percent, growth in labor productivity is 2 percent, and growth in prices is 2 percent, growth in potential (real) output will be

Setting the stage for the Great Moderation was

The Fed (and many other central banks) prefers to gauge inflation by looking at the core measure of inflation because

The statutory goal of monetary policy in the United States is

If actual output were to grow at nearly a 2.5 percent rate over the next three years, according to Okun's Law

Inflation will increase when

If actual output equals and grows with potential output

Introduction

Overview of the Financial System

The Special Role of Commercial Banks

Factors Affecting Yields

Principles of Portfolio Selection and Efficient Markets

The Money Market

The Bond Market

Securitization

The Mortgage Market

The Equity Market

Central Banking and the Federal Reserve

Monetary Policy: Challenges Faced by Policymakers

Financial Crises

The Foreign Exchange Market and Exchange Rate Regimes

Depository Institutions

The Pricing of Financial Assets

Mutual Funds

Hedge, Venture Capital, and Private Equity Funds

Large Institutional Investors

Filters