Question 1

Member banks of the Federal Reserve System

Accepted Answer

A) advise the Fed on monetary policy. 
B) are immune from the effects of monetary policy. 
C) vote on members of the Board of Governors. 
D) have little control over the system they "own." 
A) advise the Fed on monetary policy. 
B) are immune from the effects of monetary policy. 
C) vote on members of the Board of Governors. 
D) have little control over the system they "own."

Question 2

When you use the word income, you mean a value that must be qualified by a length of time.

Accepted Answer

A) True 
 B)False

Question 3

One example of qualitative easing, or unconventional monetary policy, is a purchase by the Fed of Treasury bonds.

Accepted Answer

A) True 
 B)False

Question 4

Figure 13-1
  
-In Figure 13-1, which panel shows the effect of a Fed open market sale on the interest rate?

Accepted Answer

A) Panel (
A)  
B) Panel (
B)  
C) Panel (
C)  
D) Panel (
D)  
A) Panel (
A)  
B) Panel (
B)  
C) Panel (
C)  
D) Panel (
D)

Question 5

The Federal Reserve Board of Governors

Accepted Answer

A) serve at the pleasure of the president similar to other cabinet positions. 
B) report directly to Congress and are controlled by Congress. 
C) consists of 12 members, one from each district bank. 
D) is structurally independent of the executive and legislative branches of the federal government. 
A) serve at the pleasure of the president similar to other cabinet positions. 
B) report directly to Congress and are controlled by Congress. 
C) consists of 12 members, one from each district bank. 
D) is structurally independent of the executive and legislative branches of the federal government.

Question 6

The main reason the United States established a central bank was

Accepted Answer

A) a desire for a strong centralized financial authority. 
B) to follow the conclusions of economic theory. 
C) severe inflation after the Civil War. 
D) disastrous experiences with financial panics. 
A) a desire for a strong centralized financial authority. 
B) to follow the conclusions of economic theory. 
C) severe inflation after the Civil War. 
D) disastrous experiences with financial panics.

Question 7

How are Treasury bond prices affected when the interest rate rises?

Accepted Answer

A) The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must decrease. 
B) The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must increase. 
C) The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must decrease. 
D) The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must increase. 
A) The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must decrease. 
B) The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must increase. 
C) The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must decrease. 
D) The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must increase.

Question 8

In 1998, Japan decided to make the Bank of Japan, its central bank,

Accepted Answer

A) more independent. 
B) more concerned with fighting inflation. 
C) subject to direct control by the Japanese prime minister. 
D) subject to direct control by the Diet, the Japanese parliament. 
A) more independent. 
B) more concerned with fighting inflation. 
C) subject to direct control by the Japanese prime minister. 
D) subject to direct control by the Diet, the Japanese parliament.

Question 9

If the Fed sells $5 million in government bonds, how much will the money supply change?

Accepted Answer

A) It will increase by $5 million. 
B) It will increase by more than $5 million. 
C) It will decrease by $5 million. 
D) It will decrease by more than $5 million. 
A) It will increase by $5 million. 
B) It will increase by more than $5 million. 
C) It will decrease by $5 million. 
D) It will decrease by more than $5 million.

Question 10

Explain how interest rates and bond prices are related to one another.Why is this important for monetary policy?

Accepted Answer

Interest rates and bond prices are inver

Exam 30: Monetary Policy: Conventional and Unconventional

Member banks of the Federal Reserve System

When you use the word income, you mean a value that must be qualified by a length of time.

One example of qualitative easing, or unconventional monetary policy, is a purchase by the Fed of Treasury bonds.

Figure 13-1 -In Figure 13-1, which panel shows the effect of a Fed open market sale on the interest rate?

The Federal Reserve Board of Governors

The main reason the United States established a central bank was

How are Treasury bond prices affected when the interest rate rises?

In 1998, Japan decided to make the Bank of Japan, its central bank,

If the Fed sells $5 million in government bonds, how much will the money supply change?

Explain how interest rates and bond prices are related to one another.Why is this important for monetary policy?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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