Question 1

To deal with dangerous behavior in the financial system,macro prudential tools can be used to aim directly at

Accepted Answer

A) borrowers. 
B) lenders. 
C) banks and other financial institutions. 
D) none of the above 
E)  all of the above 
A) borrowers. 
B) lenders. 
C) banks and other financial institutions. 
D) none of the above 
E)  all of the above E

Question 2

In 2014,the average inflation rate in the OECD countries was

Accepted Answer

A) 1.7%. 
B) 2.3%. 
C) 5.2%. 
D) 3.8%. 
E)  10.5%. 
A) 1.7%. 
B) 2.3%. 
C) 5.2%. 
D) 3.8%. 
E)  10.5%. A

Question 3

The existence of inflation does which of the following?

Accepted Answer

A) reduces tax distortions 
B) reduces shoe-leather costs 
C) allows for the possibility of negative real interest rates 
D) reduces the costs associated with money illusion 
A) reduces tax distortions 
B) reduces shoe-leather costs 
C) allows for the possibility of negative real interest rates 
D) reduces the costs associated with money illusion C

Question 4

The nominal interest

Accepted Answer

A) will never be negative. 
B) can be negative if inflation is unexpected. 
C) can be negative if the inflation rate is greater than the nominal interest rate. 
D) can be negative if deflation occurs. 
E)  can be negative when the real interest rate is negative. 
A) will never be negative. 
B) can be negative if inflation is unexpected. 
C) can be negative if the inflation rate is greater than the nominal interest rate. 
D) can be negative if deflation occurs. 
E)  can be negative when the real interest rate is negative.

Question 5

For this question,assume that the Fed sets monetary policy according to the Taylor rule.Suppose current U.S.macroeconomic conditions are represented by the following: π = π?* and u > un.Given this information,we would expect that the Fed will

Accepted Answer

A) implement a monetary contraction. 
B) implement a monetary expansion. 
C) maintain its current stance of monetary policy. 
D) more information is need to answer this question. 
A) implement a monetary contraction. 
B) implement a monetary expansion. 
C) maintain its current stance of monetary policy. 
D) more information is need to answer this question.

Question 6

Which of the following is not a tool of the Fed?

Accepted Answer

A) the discount rate 
B) reserve requirements 
C) open market operations 
D) the proportion of money held as currency 
A) the discount rate 
B) reserve requirements 
C) open market operations 
D) the proportion of money held as currency

Question 7

Monetary policy affects which of the following variables in the long run?

Accepted Answer

A) the level of output 
B) the rate of unemployment 
C) the rate of inflation 
D) the real interest rate 
E)  all of the above 
A) the level of output 
B) the rate of unemployment 
C) the rate of inflation 
D) the real interest rate 
E)  all of the above

Question 8

Each governor of the Federal Reserve is

Accepted Answer

A) appointed by the President to a 4-year term. 
B) appointed by the President to a 14-year term. 
C) appointed by the President for life. 
D) elected by the Presidents of banks and savings institutions. 
A) appointed by the President to a 4-year term. 
B) appointed by the President to a 14-year term. 
C) appointed by the President for life. 
D) elected by the Presidents of banks and savings institutions.

Question 9

Reducing the maximum LTV is likely to ________ demand and thus ________ the housing price increase.

Accepted Answer

A) decrease; slow down 
B) increase; slow down 
C) decrease; speed up 
D) increase; speed up 
A) decrease; slow down 
B) increase; slow down 
C) decrease; speed up 
D) increase; speed up

Question 10

Suppose the annual inflation rate is 10%,and an asset bought at the beginning of the year for $100,000 is sold for $115,000.If the capital-gains tax rate is 30%,what is the (approximate)effective tax rate on the sale of this asset?

Accepted Answer

A) 10% 
B) 20% 
C) 25% 
D) 30% 
E)  4% 
A) 10% 
B) 20% 
C) 25% 
D) 30% 
E)  4%

Question 11

What are the lessons from the crisis for monetary policy?

Accepted Answer

Liquidity trap has led a number of count

Question 12

Suppose individuals decide to reduce their holdings of money market funds.Further assume that these decisions put funds into checkable deposits.Given this information,we know that

Accepted Answer

A) the demand for M1 would increase and the demand for M2 would decrease. 
B) the demand for M1 would decrease and the demand for M2 would decrease. 
C) the demand for M1 would increase and the demand for M2 would increase. 
D) the demand for M1 would decrease and the demand for M2 would increase. 
E)  none of the above 
A) the demand for M1 would increase and the demand for M2 would decrease. 
B) the demand for M1 would decrease and the demand for M2 would decrease. 
C) the demand for M1 would increase and the demand for M2 would increase. 
D) the demand for M1 would decrease and the demand for M2 would increase. 
E)  none of the above

Question 13

Discuss the relationships among the various monetary aggregates.

Accepted Answer

Answers will include

Question 14

An economy is said to be in the liquidity trap when the short-term ________ is down to zero.

Accepted Answer

A) real interest rate on corporate bonds 
B) nominal interest rate on government bonds 
C) nominal interest rate on corporate bonds 
D) real interest rate on government bonds 
A) real interest rate on corporate bonds 
B) nominal interest rate on government bonds 
C) nominal interest rate on corporate bonds 
D) real interest rate on government bonds

Question 15

First,write out the equation that represents the Taylor rule.Second,discuss how the Taylor rule is used to explain the implementation of monetary policy.

Accepted Answer

The Taylor rule is represented as the fo

Question 16

From 2000 to 2007,which country had the highest nominal house price increase?

Accepted Answer

A) Spain 
B) Portugal 
C) Greece 
D) Italy 
A) Spain 
B) Portugal 
C) Greece 
D) Italy

Question 17

For this question,assume that the Fed sets monetary policy according to the Taylor rule.Suppose current U.S.macroeconomic conditions are represented by the following: π = π?* and u < un.Given this information,we would expect that the Fed will

Accepted Answer

A) implement a monetary contraction. 
B) implement a monetary expansion. 
C) maintain its current stance of monetary policy. 
D) more information is need to answer this question. 
A) implement a monetary contraction. 
B) implement a monetary expansion. 
C) maintain its current stance of monetary policy. 
D) more information is need to answer this question.

Question 18

Bracket creep would be more likely occur in which of the following?

Accepted Answer

A) a progressive income tax system 
B) a regressive income tax system 
C) a flat income tax system 
D) none of the above 
A) a progressive income tax system 
B) a regressive income tax system 
C) a flat income tax system 
D) none of the above

Question 19

Briefly discuss the organization of the Federal Reserve.Include in your answer a discussion of the individuals / groups who make decisions about monetary policy.

Accepted Answer

In terms of the structure of the Fed,ans

Question 20

There are how many members of the Federal Open Market Committee?

Accepted Answer

A) 15 
B) 14 
C) 12 
D) 7 
E)  5 
A) 15 
B) 14 
C) 12 
D) 7 
E)  5

Exam 23: Monetary Policy: a Summing up

To deal with dangerous behavior in the financial system,macro prudential tools can be used to aim directly at

In 2014,the average inflation rate in the OECD countries was

The existence of inflation does which of the following?

The nominal interest

For this question,assume that the Fed sets monetary policy according to the Taylor rule.Suppose current U.S.macroeconomic conditions are represented by the following: π = π?* and u > un.Given this information,we would expect that the Fed will

Which of the following is not a tool of the Fed?

Monetary policy affects which of the following variables in the long run?

Each governor of the Federal Reserve is

Reducing the maximum LTV is likely to ________ demand and thus ________ the housing price increase.

Suppose the annual inflation rate is 10%,and an asset bought at the beginning of the year for $100,000 is sold for $115,000.If the capital-gains tax rate is 30%,what is the (approximate)effective tax rate on the sale of this asset?

What are the lessons from the crisis for monetary policy?

Suppose individuals decide to reduce their holdings of money market funds.Further assume that these decisions put funds into checkable deposits.Given this information,we know that

Discuss the relationships among the various monetary aggregates.

An economy is said to be in the liquidity trap when the short-term ________ is down to zero.

First,write out the equation that represents the Taylor rule.Second,discuss how the Taylor rule is used to explain the implementation of monetary policy.

From 2000 to 2007,which country had the highest nominal house price increase?

For this question,assume that the Fed sets monetary policy according to the Taylor rule.Suppose current U.S.macroeconomic conditions are represented by the following: π = π?* and u < un.Given this information,we would expect that the Fed will

Bracket creep would be more likely occur in which of the following?

Briefly discuss the organization of the Federal Reserve.Include in your answer a discussion of the individuals / groups who make decisions about monetary policy.

There are how many members of the Federal Open Market Committee?

A Tour of the World

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Marketsthe Is-Lm Model

Financial Markets Ii: the Extended Is-Lm Model

The Labor Market

The Phillips Curve, the Natural Rate of Unemployment, and Inflation

From the Short to the Medium Run: the Is-Lm-Pc Model

The Facts of Growth

Saving, capital Accumulation, and Output

Technological Progress and Growth

Technological Progress: the Short, the Medium, and the Long Run

Financial Markets and Expectations

Expectations, consumption, and Investment

Expectations, output, and Policy

Openness in Goods and Financial Markets

The Goods Market in an Open Economy

Output, the Interest Rate, and the Exchange Rate

Exchange Rate Regimes

Should Policy Makers Be Restrained

Fiscal Policy: a Summing up

Epilogue: the Story of Macroeconomics

Appendix

Filters

Reducing the maximum LTV is likely to demand and thus the housing price increase.