Question 1

An increase in the discount rate will increase the money supply.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the required reserve ratio would be an example of contractionary monetary policy.

Accepted Answer

A) True 
 B)False

Question 3

What effect does an expansionary monetary policy have on aggregate demand?

Accepted Answer

It increas

Question 4

Which of the following is FALSE?

Accepted Answer

A)  When the Fed injects more reserves into the banking system, the money supply will increase. 
B)  If the Fed follows a monetary rule, the money supply will never increase. 
C)  One tool the Fed can use to change the money supply is to alter the reserve requirement. 
D)  If the Fed wants to maintain interest rates at a given level, it will have to allow the rate of money supply growth to vary. 
A)  When the Fed injects more reserves into the banking system, the money supply will increase. 
B)  If the Fed follows a monetary rule, the money supply will never increase. 
C)  One tool the Fed can use to change the money supply is to alter the reserve requirement. 
D)  If the Fed wants to maintain interest rates at a given level, it will have to allow the rate of money supply growth to vary.

Question 5

If the Federal Reserve follows a monetary rule, it will not use discretionary monetary policy to counteract fluctuations in the level of business activity.

Accepted Answer

A) True 
 B)False

Question 6

If the Fed wishes to pursue a contractionary monetary policy, it will _________ bonds on the open market.

Accepted Answer

The answer of If the Fed wishes to pursue a...

Question 7

The direct effect of changes in the money supply is that

Accepted Answer

A)  bond prices change. 
B)  firms change their investment plans. 
C)  state governments change their taxation plans. 
D)  consumers change their spending. 
A)  bond prices change. 
B)  firms change their investment plans. 
C)  state governments change their taxation plans. 
D)  consumers change their spending.

Question 8

When Fed purchases bonds on the open market, it injects reserves into the banking system, and the money supply increases.

Accepted Answer

A) True 
 B)False

Question 9

When the Federal Reserve engages in open market operations, it changes interest rates without affecting the prices of bonds.

Accepted Answer

A) True 
 B)False

Question 10

If the Fed increases 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 11

Keynesians believe that expansionary monetary policy increases aggregate demand indirectly as the resulting lower interest rates stimulate _________.

Accepted Answer

The answer of Keynesians believe that expansionary monetary policy increases...

Question 12

To increase aggregate demand, the Fed would

Accepted Answer

A)  decrease the money supply. 
B)  increase interest rates. 
C)  sell bonds. 
D)  increase the money supply. 
A)  decrease the money supply. 
B)  increase interest rates. 
C)  sell bonds. 
D)  increase the money supply.

Question 13

How would bank behavior change in response to a higher discount rate?

Accepted Answer

Banks might choose to hold exc

Question 14

According to monetarists, the money supply should be allowed

Accepted Answer

A)  to grow as fast as possible. 
B)  to grow at a minimal rate of 10% per year. 
C)  to grow at a rate commensurate with the rate of growth of our economy. 
D)  to remain stable. 
A)  to grow as fast as possible. 
B)  to grow at a minimal rate of 10% per year. 
C)  to grow at a rate commensurate with the rate of growth of our economy. 
D)  to remain stable.

Question 15

Why does an open market purchase of bonds lead to an increase in the money supply?

Accepted Answer

The purchase of bonds injects

Question 16

The money supply increases when banks issue more loans.

Accepted Answer

A) True 
 B)False

Question 17

To alter the rate of growth of the money supply the Fed can do all EXCEPT

Accepted Answer

A)  engage in open market operations. 
B)  change the discount rate. 
C)  require banks to issue more loans. 
D)  change the reserve requirement. 
A)  engage in open market operations. 
B)  change the discount rate. 
C)  require banks to issue more loans. 
D)  change the reserve requirement.

Question 18

The Federal Reserve currently announces its monetary policy by designating a targeted rate of inflation.

Accepted Answer

A) True 
 B)False

Question 19

According to Keynesian theory, an decrease in the money supply will cause

Accepted Answer

A)  interest rates to fall and the quantity of investment to rise, leading to a decrease in aggregate demand. 
B)  interest rates to rise and the quantity of investment to rise, leading to a decrease in aggregate demand. 
C)  interest rates to fall and the quantity of investment to rise, leading to an increase in aggregate demand. 
D)  interest rates to rise and the quantity of investment to fall, leading to a decrease in aggregate demand. 
A)  interest rates to fall and the quantity of investment to rise, leading to a decrease in aggregate demand. 
B)  interest rates to rise and the quantity of investment to rise, leading to a decrease in aggregate demand. 
C)  interest rates to fall and the quantity of investment to rise, leading to an increase in aggregate demand. 
D)  interest rates to rise and the quantity of investment to fall, leading to a decrease in aggregate demand.

Question 20

Which of the following is FALSE?

Accepted Answer

A)  An expansionary monetary policy is used to combat inflation. 
B)  The Fed serves to regulate the money supply and also to provide a system for check clearing between banks. 
C)  In the long run, higher rates of money growth lead to higher rates of inflation. 
D)  An increase in interest rates will lead to lower bond prices. 
A)  An expansionary monetary policy is used to combat inflation. 
B)  The Fed serves to regulate the money supply and also to provide a system for check clearing between banks. 
C)  In the long run, higher rates of money growth lead to higher rates of inflation. 
D)  An increase in interest rates will lead to lower bond prices.

An increase in the discount rate will increase the money supply.

An increase in the required reserve ratio would be an example of contractionary monetary policy.

What effect does an expansionary monetary policy have on aggregate demand?

Which of the following is FALSE?

If the Federal Reserve follows a monetary rule, it will not use discretionary monetary policy to counteract fluctuations in the level of business activity.

If the Fed wishes to pursue a contractionary monetary policy, it will _________ bonds on the open market.

The direct effect of changes in the money supply is that

When Fed purchases bonds on the open market, it injects reserves into the banking system, and the money supply increases.

When the Federal Reserve engages in open market operations, it changes interest rates without affecting the prices of bonds.

If the Fed increases the reserve requirement,

Keynesians believe that expansionary monetary policy increases aggregate demand indirectly as the resulting lower interest rates stimulate _________.

To increase aggregate demand, the Fed would

How would bank behavior change in response to a higher discount rate?

According to monetarists, the money supply should be allowed

Why does an open market purchase of bonds lead to an increase in the money supply?

The money supply increases when banks issue more loans.

To alter the rate of growth of the money supply the Fed can do all EXCEPT

The Federal Reserve currently announces its monetary policy by designating a targeted rate of inflation.

According to Keynesian theory, an decrease in the money supply will cause

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

An increase in the discount rate will increase the money supply.

An increase in the required reserve ratio would be an example of contractionary monetary policy.

What effect does an expansionary monetary policy have on aggregate demand?

Which of the following is FALSE?

If the Federal Reserve follows a monetary rule, it will not use discretionary monetary policy to counteract fluctuations in the level of business activity.

If the Fed wishes to pursue a contractionary monetary policy, it will _________ bonds on the open market.

The direct effect of changes in the money supply is that

When Fed purchases bonds on the open market, it injects reserves into the banking system, and the money supply increases.

When the Federal Reserve engages in open market operations, it changes interest rates without affecting the prices of bonds.

If the Fed increases the reserve requirement,

Keynesians believe that expansionary monetary policy increases aggregate demand indirectly as the resulting lower interest rates stimulate _________.

To increase aggregate demand, the Fed would

How would bank behavior change in response to a higher discount rate?

According to monetarists, the money supply should be allowed

Why does an open market purchase of bonds lead to an increase in the money supply?

The money supply increases when banks issue more loans.

To alter the rate of growth of the money supply the Fed can do all EXCEPT

The Federal Reserve currently announces its monetary policy by designating a targeted rate of inflation.

According to Keynesian theory, an decrease in the money supply will cause

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