Question 1

An open market purchase of bonds by the Fed injects _________ into the banking system.

Accepted Answer

The answer of An open market purchase of bonds by...

Question 2

Which of the following tools does the Fed rarely use?

Accepted Answer

A)  Changing the discount rate 
B)  Buying government bonds 
C)  Selling government bonds 
D)  Changing the required reserve ratio 
A)  Changing the discount rate 
B)  Buying government bonds 
C)  Selling government bonds 
D)  Changing the required reserve ratio

Question 3

If the Fed follows a _________ _________ , it will increase the money supply at a rate of growth equal to the rate of economic growth.

Accepted Answer

The answer of If the Fed follows a _________ _________...

Question 4

Increases in the discount rate

Accepted Answer

A)  are a tool of contractionary monetary policy. 
B)  do not affect bank behavior. 
C)  serve to expand the money supply. 
D)  encourage banks to hold less than the required amount of reserves. 
A)  are a tool of contractionary monetary policy. 
B)  do not affect bank behavior. 
C)  serve to expand the money supply. 
D)  encourage banks to hold less than the required amount of reserves.

Question 5

Contractionary monetary policy is used to combat _________.

Accepted Answer

The answer of Contractionary monetary policy is used to combat...

Question 6

Which of the following is not an effect of an increase in the money supply?

Accepted Answer

A)  People try to buy more goods and services 
B)  Banks have excess reserves 
C)  Aggregate supply increases 
D)  Price level increases 
A)  People try to buy more goods and services 
B)  Banks have excess reserves 
C)  Aggregate supply increases 
D)  Price level increases

Question 7

If the Fed decreases the reserve requirement,

Accepted Answer

A)  banks will issue more loans. 
B)  banks will issue fewer loans. 
C)  consumers will save more. 
D)  consumers will save less. 
A)  banks will issue more loans. 
B)  banks will issue fewer loans. 
C)  consumers will save more. 
D)  consumers will save less.

Question 8

Changes in the money supply affect interest rates and levels of spending, but they have no effect on the price level.

Accepted Answer

A) True 
 B)False

Question 9

How are bond prices affected when interest rates rise?

Accepted Answer

The answer of How are bond prices affected when interest...

Question 10

Which of the following is FALSE?

Accepted Answer

A)  To the extent that there are lags in the implementation of monetary policy, its effectiveness is lessened. 
B)  An increase in the money supply will increase the purchasing power of a dollar. 
C)  An expansionary monetary policy will increase aggregate demand. 
D)  A contractionary monetary policy will decrease aggregate demand. 
A)  To the extent that there are lags in the implementation of monetary policy, its effectiveness is lessened. 
B)  An increase in the money supply will increase the purchasing power of a dollar. 
C)  An expansionary monetary policy will increase aggregate demand. 
D)  A contractionary monetary policy will decrease aggregate demand.

Question 11

If Federal Reserve chairman Alan Greenspan announces a reduction in interest rates, this means that

Accepted Answer

A)  the Fed will be following a contractionary monetary policy. 
B)  the Fed will be buying government securities on the open market. 
C)  the Fed will be selling government securities on the open market. 
D)  the Fed will be increasing the required reserve ratio. 
A)  the Fed will be following a contractionary monetary policy. 
B)  the Fed will be buying government securities on the open market. 
C)  the Fed will be selling government securities on the open market. 
D)  the Fed will be increasing the required reserve ratio.

Question 12

The Fed would be pursuing an expansionary monetary policy if it were

Accepted Answer

A)  selling bonds. 
B)  raising the discount rate. 
C)  lowering the required reserve ratio. 
D)  lowering bond prices. 
A)  selling bonds. 
B)  raising the discount rate. 
C)  lowering the required reserve ratio. 
D)  lowering bond prices.

Question 13

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

Accepted Answer

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

Question 14

How are bond prices affected when the Federal Reserve purchases bonds?

Accepted Answer

The answer of How are bond prices affected when the...

Question 15

An increase in bond prices is usually accompanied by

Accepted Answer

A)  an increase in interest rates. 
B)  a decrease in the quantity of investment. 
C)  a decrease in interest rates. 
D)  an increase in the opportunity cost of holding money. 
A)  an increase in interest rates. 
B)  a decrease in the quantity of investment. 
C)  a decrease in interest rates. 
D)  an increase in the opportunity cost of holding money.

Question 16

When the Fed buys government securities on the open market,

Accepted Answer

A)  bond prices will fall. 
B)  interest rates will increase. 
C)  the money supply will contract. 
D)  it is engaging in expansionary monetary policy. 
A)  bond prices will fall. 
B)  interest rates will increase. 
C)  the money supply will contract. 
D)  it is engaging in expansionary monetary policy.

Question 17

If the Fed sells U.S. government securities on the open market,

Accepted Answer

A)  there will be no effect on the money supply, but aggregate demand will decrease. 
B)  there will be no effect on the money supply, but aggregate demand will increase. 
C)  reserves in the banking system will decrease. 
D)  interest rates will decrease. 
A)  there will be no effect on the money supply, but aggregate demand will decrease. 
B)  there will be no effect on the money supply, but aggregate demand will increase. 
C)  reserves in the banking system will decrease. 
D)  interest rates will decrease.

Question 18

To the extent that there are time lags present in the implementation of monetary policy, its effectiveness is lessened.

Accepted Answer

A) True 
 B)False

Question 19

The Fed currently announces an _________ _________ target when it announces monetary policy.

Accepted Answer

The answer of The Fed currently announces an _________ _________...

Question 20

How would the money supply expand if the Fed follows a monetary rule?

Accepted Answer

The money supply wou

An open market purchase of bonds by the Fed injects _________ into the banking system.

Which of the following tools does the Fed rarely use?

If the Fed follows a _ _ , it will increase the money supply at a rate of growth equal to the rate of economic growth.

Increases in the discount rate

Contractionary monetary policy is used to combat _________.

Which of the following is not an effect of an increase in the money supply?

If the Fed decreases the reserve requirement,

Changes in the money supply affect interest rates and levels of spending, but they have no effect on the price level.

How are bond prices affected when interest rates rise?

Which of the following is FALSE?

If Federal Reserve chairman Alan Greenspan announces a reduction in interest rates, this means that

The Fed would be pursuing an expansionary monetary policy if it were

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

How are bond prices affected when the Federal Reserve purchases bonds?

An increase in bond prices is usually accompanied by

When the Fed buys government securities on the open market,

If the Fed sells U.S. government securities on the open market,

To the extent that there are time lags present in the implementation of monetary policy, its effectiveness is lessened.

The Fed currently announces an _ _ target when it announces monetary policy.

How would the money supply expand if the Fed follows a monetary rule?

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

An open market purchase of bonds by the Fed injects _________ into the banking system.

Which of the following tools does the Fed rarely use?

If the Fed follows a _________ _________ , it will increase the money supply at a rate of growth equal to the rate of economic growth.

Increases in the discount rate

Contractionary monetary policy is used to combat _________.

Which of the following is not an effect of an increase in the money supply?

If the Fed decreases the reserve requirement,

Changes in the money supply affect interest rates and levels of spending, but they have no effect on the price level.

How are bond prices affected when interest rates rise?

Which of the following is FALSE?

If Federal Reserve chairman Alan Greenspan announces a reduction in interest rates, this means that

The Fed would be pursuing an expansionary monetary policy if it were

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

How are bond prices affected when the Federal Reserve purchases bonds?

An increase in bond prices is usually accompanied by

When the Fed buys government securities on the open market,

If the Fed sells U.S. government securities on the open market,

To the extent that there are time lags present in the implementation of monetary policy, its effectiveness is lessened.

The Fed currently announces an _________ _________ target when it announces monetary policy.

How would the money supply expand if the Fed follows a monetary rule?

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

If the Fed follows a _ _ , it will increase the money supply at a rate of growth equal to the rate of economic growth.

The Fed currently announces an _ _ target when it announces monetary policy.