Question 1

To the extent that banks hold excess reserves, the actual money multiplier will be less than its potential.

Accepted Answer

A) True 
 B)False

Question 2

Expansionary monetary policy serves to increase aggregate supply.

Accepted Answer

A) True 
 B)False

Question 3

Monetary policy is _________ if it serves to decrease the supply of credit.

Accepted Answer

The answer of Monetary policy is _________ if it serves...

Question 4

The goal of expansionary monetary policy is

Accepted Answer

A)  to fight a recession. 
B)  to fight inflation. 
C)  to reduce the price of basic resources. 
D)  to increase sales tax revenue for the government. 
A)  to fight a recession. 
B)  to fight inflation. 
C)  to reduce the price of basic resources. 
D)  to increase sales tax revenue for the government.

Question 5

Open market operations alter the level of reserves in the banking system.

Accepted Answer

A) True 
 B)False

Question 6

"Open market operations" is the term used to refer to

Accepted Answer

A)  the purchase and sale of government bonds by the Federal Reserve. 
B)  actions taken by the Federal Reserve to intervene in stock market prices. 
C)  actions taken by consumers to spend money in the marketplace. 
D)  actions taken by firms to evaluate their product markets. 
A)  the purchase and sale of government bonds by the Federal Reserve. 
B)  actions taken by the Federal Reserve to intervene in stock market prices. 
C)  actions taken by consumers to spend money in the marketplace. 
D)  actions taken by firms to evaluate their product markets.

Question 7

How did the Federal Reserve affect the money supply during the Great Depression?

Accepted Answer

It allowed the money

Question 8

Banks respond to changes in the _________ rate by changing the interest rate charged on loans to their customers.

Accepted Answer

The answer of Banks respond to changes in the _________...

Question 9

The Fed announces changes in monetary policy by stating a target level of M1.

Accepted Answer

A) True 
 B)False

Question 10

Expansionary monetary policy serves to _________ aggregate demand.

Accepted Answer

The answer of Expansionary monetary policy serves to _________ aggregate...

Question 11

What types of lags does the Fed encounter in implementing monetary policy?

Accepted Answer

Recognitio

Question 12

The tool of monetary policy that is most frequently used by the Fed is

Accepted Answer

A)  changes in the reserve requirement. 
B)  changes in the discount rate. 
C)  open market operations. 
D)  changes in margin requirements. 
A)  changes in the reserve requirement. 
B)  changes in the discount rate. 
C)  open market operations. 
D)  changes in margin requirements.

Question 13

Economists who generally believe that any excessive growth in the money supply will do little more than cause inflation are called

Accepted Answer

A)  Keynesians. 
B)  classicals. 
C)  supply siders. 
D)  monetarists. 
A)  Keynesians. 
B)  classicals. 
C)  supply siders. 
D)  monetarists.

Question 14

According to the Keynesian model of monetary policy

Accepted Answer

A)  the Fed should contract the money supply during recessions. 
B)  the Fed should allow the money supply to grow at a constant rate. 
C)  the Fed should expand the money supply during recessions. 
D)  the Fed should cut taxes during a recession. 
A)  the Fed should contract the money supply during recessions. 
B)  the Fed should allow the money supply to grow at a constant rate. 
C)  the Fed should expand the money supply during recessions. 
D)  the Fed should cut taxes during a recession.

Question 15

Monetarists believe that

Accepted Answer

A)  the Fed should be constantly changing the growth of the money supply to counteract economic fluctuations. 
B)  the Fed should allow the money supply to grow at a constant rate to accommodate the natural rate of economic growth. 
C)  the Fed should alter the target growth rate of money periodically to counteract adverse economic activity. 
D)  the Open Market Committee should only sell government bonds, never buy them. 
A)  the Fed should be constantly changing the growth of the money supply to counteract economic fluctuations. 
B)  the Fed should allow the money supply to grow at a constant rate to accommodate the natural rate of economic growth. 
C)  the Fed should alter the target growth rate of money periodically to counteract adverse economic activity. 
D)  the Open Market Committee should only sell government bonds, never buy them.

Question 16

Monetary policy consists of open market operations, adjustments in the discount rate, and changes in the required reserve ratio.

Accepted Answer

A) True 
 B)False

Question 17

Both Keynesians and monetarists agree that monetary policy works by shifting aggregate supply.

Accepted Answer

A) True 
 B)False

Question 18

Economists who support a monetary rule

Accepted Answer

A)  believe that the Fed should increase the money supply at a consistently smooth rate. 
B)  advocate having a high rate of inflation rather than a high rate of unemployment. 
C)  believe that the Fed should use discretionary monetary policy to fight unemployment. 
D)  believe that the Fed should use discretionary monetary policy to fight recessions. 
A)  believe that the Fed should increase the money supply at a consistently smooth rate. 
B)  advocate having a high rate of inflation rather than a high rate of unemployment. 
C)  believe that the Fed should use discretionary monetary policy to fight unemployment. 
D)  believe that the Fed should use discretionary monetary policy to fight recessions.

Question 19

Increases in the discount rate

Accepted Answer

A)  encourage banks to risk letting their reserves run below the required ratio. 
B)  increase the cost to banks of borrowing from the Fed. 
C)  decrease the cost to banks of borrowing from the Fed. 
D)  decrease the size of the potential money multiplier. 
A)  encourage banks to risk letting their reserves run below the required ratio. 
B)  increase the cost to banks of borrowing from the Fed. 
C)  decrease the cost to banks of borrowing from the Fed. 
D)  decrease the size of the potential money multiplier.

Question 20

Which of the following is FALSE?

Accepted Answer

A)  The effectiveness of monetary policy is limited by lags in its implementation. 
B)  Contractionary monetary policy is designed to increase aggregate demand. 
C)  If the Fed follows a monetary rule, it will increase the money supply consistently at a smooth rate. 
D)  Interest rates and bond prices are inversely related. 
A)  The effectiveness of monetary policy is limited by lags in its implementation. 
B)  Contractionary monetary policy is designed to increase aggregate demand. 
C)  If the Fed follows a monetary rule, it will increase the money supply consistently at a smooth rate. 
D)  Interest rates and bond prices are inversely related.

To the extent that banks hold excess reserves, the actual money multiplier will be less than its potential.

Expansionary monetary policy serves to increase aggregate supply.

Monetary policy is _________ if it serves to decrease the supply of credit.

The goal of expansionary monetary policy is

Open market operations alter the level of reserves in the banking system.

"Open market operations" is the term used to refer to

How did the Federal Reserve affect the money supply during the Great Depression?

Banks respond to changes in the _________ rate by changing the interest rate charged on loans to their customers.

The Fed announces changes in monetary policy by stating a target level of M1.

Expansionary monetary policy serves to _________ aggregate demand.

What types of lags does the Fed encounter in implementing monetary policy?

The tool of monetary policy that is most frequently used by the Fed is

Economists who generally believe that any excessive growth in the money supply will do little more than cause inflation are called

According to the Keynesian model of monetary policy

Monetarists believe that

Monetary policy consists of open market operations, adjustments in the discount rate, and changes in the required reserve ratio.

Both Keynesians and monetarists agree that monetary policy works by shifting aggregate supply.

Economists who support a monetary rule

Increases in the discount rate

Which of the following is FALSE?

Economics and the World of Scarcity

The United States Within the World Economy

Demand and Supply

Consumer Decision Making and Consumer Reaction to Price Changes

The Firm: Production and Cost

The Two Extremes: Perfect Competition and Pure Monopoly

In Between the Extremes: Imperfect Competition

Market and Government Failures

Labor Economics

Unemployment, Inflation, and the Business Cycle

Aggregate Demand and Supply

The Fiscal Policy Approach to Stabilization

Money and Our Banking System

How Economies Grow

Trading With Other Nations

Financing World Trade

Filters

Exam 14: The Monetary Policy Approach to Stabilization

To the extent that banks hold excess reserves, the actual money multiplier will be less than its potential.

Expansionary monetary policy serves to increase aggregate supply.

Monetary policy is _________ if it serves to decrease the supply of credit.

The goal of expansionary monetary policy is

Open market operations alter the level of reserves in the banking system.

"Open market operations" is the term used to refer to

How did the Federal Reserve affect the money supply during the Great Depression?

Banks respond to changes in the _________ rate by changing the interest rate charged on loans to their customers.

The Fed announces changes in monetary policy by stating a target level of M1.

Expansionary monetary policy serves to _________ aggregate demand.

What types of lags does the Fed encounter in implementing monetary policy?

The tool of monetary policy that is most frequently used by the Fed is

Economists who generally believe that any excessive growth in the money supply will do little more than cause inflation are called

According to the Keynesian model of monetary policy

Monetarists believe that

Monetary policy consists of open market operations, adjustments in the discount rate, and changes in the required reserve ratio.

Both Keynesians and monetarists agree that monetary policy works by shifting aggregate supply.

Economists who support a monetary rule

Increases in the discount rate

Which of the following is FALSE?

Economics and the World of Scarcity

The United States Within the World Economy

Demand and Supply

Consumer Decision Making and Consumer Reaction to Price Changes

The Firm: Production and Cost

The Two Extremes: Perfect Competition and Pure Monopoly

In Between the Extremes: Imperfect Competition

Market and Government Failures

Labor Economics

Unemployment, Inflation, and the Business Cycle

Aggregate Demand and Supply

The Fiscal Policy Approach to Stabilization

Money and Our Banking System

How Economies Grow

Trading With Other Nations

Financing World Trade

Filters