Question 1

The demand for reserves increases as the price level rises because

Accepted Answer

A) people want money to buy goods that will appreciate with inflation. 
B) people need more money to finance transactions. 
C) the opportunity cost of holding money increases. 
D) higher prices reduce the value of dollar assets. 
A) people want money to buy goods that will appreciate with inflation. 
B) people need more money to finance transactions. 
C) the opportunity cost of holding money increases. 
D) higher prices reduce the value of dollar assets.

Question 2

How does a central bank influence the lending capacity of the banks?

Accepted Answer

A central bank can influence the lending

Question 3

Open market operations affect the supply of reserves.

Accepted Answer

A) True 
 B)False

Question 4

Define the following terms and explain their importance to the study of macroeconomics.
a.central bank
b.Federal Open Market Committee
c.supply of money
d.monetary policy

Accepted Answer

a.A central bank is a government institu

Question 5

When the Fed wants to expand the money supply, it

Accepted Answer

A) buys government securities. 
B) sells government securities. 
C) buys common stock. 
D) sells common stock. 
A) buys government securities. 
B) sells government securities. 
C) buys common stock. 
D) sells common stock.

Question 6

The Fed's founders viewed the Fed as a means of maintaining the money supply during economic contractions and as a lender of last resort.

Accepted Answer

A) True 
 B)False

Question 7

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

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

Which of the following is an unconventional monetary policy?

Accepted Answer

A) ​lending to banks in unprecedented volume 
B) ​lending to companies other than banks 
C) ​reducing the federal funds rate to zero 
D) ​All of these are unconventional monetary policies. 
A) ​lending to banks in unprecedented volume 
B) ​lending to companies other than banks 
C) ​reducing the federal funds rate to zero 
D) ​All of these are unconventional monetary policies.

Question 9

Some form of financial distress can become a full-blown recession if risk lead to ____ interest rates and ____ aggregate demand.

Accepted Answer

A) higher; increased 
B) higher; decreased 
C) lower; increased 
D) lower; decreased 
A) higher; increased 
B) higher; decreased 
C) lower; increased 
D) lower; decreased

Question 10

Open market operations have their initial effect on bank

Accepted Answer

A) lending. 
B) reserves. 
C) profits. 
D) revenues. 
A) lending. 
B) reserves. 
C) profits. 
D) revenues.

Question 11

Which of the following has proved to be spectacularly false, at least recently?

Accepted Answer

A) ​as an expansion proceeds, people will hold no more cash 
B) ​as an expansion proceeds, banks will hold no more excess reserves 
C) ​the oversmplified money multiplier formula is predicated on two critical assumptions 
D) ​All of the above are false. 
A) ​as an expansion proceeds, people will hold no more cash 
B) ​as an expansion proceeds, banks will hold no more excess reserves 
C) ​the oversmplified money multiplier formula is predicated on two critical assumptions 
D) ​All of the above are false.

Question 12

The demand for reserves depends on income and the price level.

Accepted Answer

A) True 
 B)False

Question 13

During the stock market crash of October 1987, the Fed

Accepted Answer

A) raised the discount rate. 
B) raised reserve requirements. 
C) increased lending to member banks. 
D) sold government securities. 
A) raised the discount rate. 
B) raised reserve requirements. 
C) increased lending to member banks. 
D) sold government securities.

Question 14

Which of the following will increase interest rates in the short run?

Accepted Answer

A) an decrease in reserve requirements 
B) open market sales by the Fed 
C) a decrease in real GDP 
D) an decrease in the price level 
A) an decrease in reserve requirements 
B) open market sales by the Fed 
C) a decrease in real GDP 
D) an decrease in the price level

Question 15

Generally, most of the world's industrial countries believe that central banks should be independent of their governments.​

Accepted Answer

A) True 
 B)False

Question 16

As interest rates rise, banks seek to decrease their loans and, thereby, shrink the money supply.

Accepted Answer

A) True 
 B)False

Question 17

The Fed has which of the following as its strongest control over the money supply?

Accepted Answer

A) interest rate changes 
B) the discount rate 
C) open market operations 
D) the required reserve rate 
A) interest rate changes 
B) the discount rate 
C) open market operations 
D) the required reserve rate

Question 18

The central bank in the United States is known as the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 19

The Federal Reserve's principal tool in the manipulation of aggregate demand is the personal income tax.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following phrases would be used to describe an income amount?

Accepted Answer

A) per year 
B) per month 
C) per week 
D) All of the above are correct. 
A) per year 
B) per month 
C) per week 
D) All of the above are correct.

Exam 30: Monetary Policy: Conventional and Unconventional

The demand for reserves increases as the price level rises because

How does a central bank influence the lending capacity of the banks?

Open market operations affect the supply of reserves.

Define the following terms and explain their importance to the study of macroeconomics. a.central bank b.Federal Open Market Committee c.supply of money d.monetary policy

When the Fed wants to expand the money supply, it

The Fed's founders viewed the Fed as a means of maintaining the money supply during economic contractions and as a lender of last resort.

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

Which of the following is an unconventional monetary policy?

Some form of financial distress can become a full-blown recession if risk lead to ____ interest rates and ____ aggregate demand.

Open market operations have their initial effect on bank

Which of the following has proved to be spectacularly false, at least recently?

The demand for reserves depends on income and the price level.

During the stock market crash of October 1987, the Fed

Which of the following will increase interest rates in the short run?

Generally, most of the world's industrial countries believe that central banks should be independent of their governments.​

As interest rates rise, banks seek to decrease their loans and, thereby, shrink the money supply.

The Fed has which of the following as its strongest control over the money supply?

The central bank in the United States is known as the Federal Reserve System.

The Federal Reserve's principal tool in the manipulation of aggregate demand is the personal income tax.

Which of the following phrases would be used to describe an income amount?

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

Filters

Some form of financial distress can become a full-blown recession if risk lead to interest rates and aggregate demand.

Generally, most of the world's industrial countries believe that central banks should be independent of their governments.