Question 1

Within the market for reserves,an increase in the quantity of reserves results in a

Accepted Answer

A)  rise in the equilibrium federal funds rate. 
B)  fall in the equilibrium federal funds rate. 
C)  rise in the equilibrium real wage rate. 
D)  fall in the equilibrium money wage rate. 
A)  rise in the equilibrium federal funds rate. 
B)  fall in the equilibrium federal funds rate. 
C)  rise in the equilibrium real wage rate. 
D)  fall in the equilibrium money wage rate. B

Question 2

Monetary policy produces ripple effects,some of which happen quickly and some that can take years to produce change.Which of the following takes the longest to change?

Accepted Answer

A)  inflation rate 
B)  federal funds rate 
C)  exchange rate 
D)  monetary base 
A)  inflation rate 
B)  federal funds rate 
C)  exchange rate 
D)  monetary base A

Question 3

In response to an inflationary gap,the Fed

Accepted Answer

A)  waits until the price level falls before acting. 
B)  lowers the federal funds rate by buying U.S. government securities. 
C)  raises the federal funds rate by selling U.S. government securities. 
D)  raises the federal funds rate by buying U.S. government securities. 
A)  waits until the price level falls before acting. 
B)  lowers the federal funds rate by buying U.S. government securities. 
C)  raises the federal funds rate by selling U.S. government securities. 
D)  raises the federal funds rate by buying U.S. government securities. C

Question 4

8 Extended Problems
  
-The figure above shows the demand for money in Kiteland.
a) If the Kiteland Central Bank has set the quantity of money so that the equilibrium interest rate is 4 percent,draw the supply of money curve.
b) Suppose Kiteland's real GDP increases so that the demand for money changes by 100 billion yaks.The Kiteland Central Bank takes no actions.Show the effects of this event on your figure.What happens to the interest rate?
What happens to the quantity of money in the economy?
c) If the Central Bank wants to prevent the interest rate from changing,what must it do to the quantity of money?
Draw the new supply of money curve.
d) In order to change the quantity of money to keep the interest rate constant,suppose the Kiteland Central Bank uses open market operations.Does it make an open market purchase or an open market sale?
Explain your answer.

Accepted Answer

@#IMG-DLM& 
a)See the figure above.When the demand

Question 5

Which of the following is a problem in pursuing monetary policy?

Accepted Answer

A)  The lag between a change in the quantity of money and its effect on economic activity may be long. 
B)  Monetary policy must be approved by the Congress. 
C)  The Fed cannot control the federal funds rate. 
D)  None of the above answers is correct. 
A)  The lag between a change in the quantity of money and its effect on economic activity may be long. 
B)  Monetary policy must be approved by the Congress. 
C)  The Fed cannot control the federal funds rate. 
D)  None of the above answers is correct.

Question 6

The Taylor Rule states that the

Accepted Answer

A)  Fed should target the monetary base and not the federal funds rate. 
B)  use of an exchange rate target, although costly, is economically efficient. 
C)  Fed should adjust the federal funds rate to take account of deviations of inflation from its target and real GDP from potential GDP. 
D)  None of the above is correct. 
A)  Fed should target the monetary base and not the federal funds rate. 
B)  use of an exchange rate target, although costly, is economically efficient. 
C)  Fed should adjust the federal funds rate to take account of deviations of inflation from its target and real GDP from potential GDP. 
D)  None of the above is correct.

Question 7

When the Fed lowers the federal funds rate,it increases reserves and increases the quantity of deposits and loans created.

Accepted Answer

A) True 
 B)False

Question 8

When the Fed lowers the federal funds rate,

Accepted Answer

A)  consumption expenditures decrease. 
B)  the dollar increases in value on foreign exchange markets. 
C)  net exports decrease. 
D)  investment expenditures increase. 
A)  consumption expenditures decrease. 
B)  the dollar increases in value on foreign exchange markets. 
C)  net exports decrease. 
D)  investment expenditures increase.

Question 9

If the Fed raises the interest rate,the first effect in an AS/AD figure is a ________ shift of the ________ curve.

Accepted Answer

A)  rightward; AD 
B)  leftward; AD 
C)  rightward; SAS 
D)  leftward; SAS 
A)  rightward; AD 
B)  leftward; AD 
C)  rightward; SAS 
D)  leftward; SAS

Question 10

The Federal Reserve monetary policy goals of maximum employment means

Accepted Answer

A)  a zero percent unemployment rate. 
B)  a zero percent natural unemployment rate. 
C)  keeping the unemployment rate close to the natural unemployment rate. 
D)  cyclical unemployment should not necessarily be minimized. 
A)  a zero percent unemployment rate. 
B)  a zero percent natural unemployment rate. 
C)  keeping the unemployment rate close to the natural unemployment rate. 
D)  cyclical unemployment should not necessarily be minimized.

Question 11

To decrease inflation,the Federal Reserve would adjust its target for the federal funds rate upward.

Accepted Answer

A) True 
 B)False

Question 12

Monetary policy is controlled by

Accepted Answer

A)  Congress. 
B)  the president. 
C)  the Federal Reserve. 
D)  the Treasury Department. 
A)  Congress. 
B)  the president. 
C)  the Federal Reserve. 
D)  the Treasury Department.

Question 13

Suppose that several European countries enter a recession decreasing U.S.exports.To move U.S.GDP back to potential GDP,the Fed should

Accepted Answer

A)  lower the federal funds rate. 
B)  raise the federal funds rate. 
C)  increase the government's budget deficit. 
D)  decrease the government's budget deficit. 
A)  lower the federal funds rate. 
B)  raise the federal funds rate. 
C)  increase the government's budget deficit. 
D)  decrease the government's budget deficit.

Question 14

Suppose in the money market the equilibrium interest rate is 5 percent and quantity of money demanded and supplied are both equal to $2 trillion dollars.If the Fed increases the quantity of money,what is the effect on the interest rate?

Accepted Answer

If the Fed increases the quant

Question 15

Ben Bernanke has suggested that a core inflation rate of ________ is the equivalent of price stability.

Accepted Answer

A)  between 1 percent to 2 percent 
B)  zero 
C)  less than 5 percent 
D)  less than zero 
A)  between 1 percent to 2 percent 
B)  zero 
C)  less than 5 percent 
D)  less than zero

Question 16

The key goal of monetary policy is to

Accepted Answer

A)  reverse the productivity growth slowdown. 
B)  keep the budget deficit small and/or the budget surplus large. 
C)  lower taxes. 
D)  maintain low inflation. 
A)  reverse the productivity growth slowdown. 
B)  keep the budget deficit small and/or the budget surplus large. 
C)  lower taxes. 
D)  maintain low inflation.

Question 17

One problem with the ripple effect from the Fed's monetary policy is

Accepted Answer

A)  the fact that the monetary policy transmission process is long and drawn out. 
B)  that changing the Federal funds target rate seldom has an effect on the markets for reserves and loanable funds. 
C)  the tight relationship between that the Federal funds rate has to aggregate spending. 
D)  the frequent misalignment of the spread between the Federal funds rate and the Federal funds rate target. 
A)  the fact that the monetary policy transmission process is long and drawn out. 
B)  that changing the Federal funds target rate seldom has an effect on the markets for reserves and loanable funds. 
C)  the tight relationship between that the Federal funds rate has to aggregate spending. 
D)  the frequent misalignment of the spread between the Federal funds rate and the Federal funds rate target.

Question 18

In 2012,the federal funds rate was 0.15 percent,which means that the opportunity cost of holding reserves was ________ and consequently banks had a ________ incentive to economize on reserves.

Accepted Answer

A)  low; small 
B)  low; large 
C)  high; small 
D)  high; large 
A)  low; small 
B)  low; large 
C)  high; small 
D)  high; large

Question 19

The central bank of Cobra sells securities in an open market operation.In the short run,aggregate demand ________,real GDP ________,and the price level ________.

Accepted Answer

A)  does not change; increases; falls 
B)  decreases; decreases; falls 
C)  increases; increases; rises 
D)  does not change; decreases; rises 
A)  does not change; increases; falls 
B)  decreases; decreases; falls 
C)  increases; increases; rises 
D)  does not change; decreases; rises

Question 20

Usually,the Federal Reserve changes its target for the federal funds rate in units of

Accepted Answer

A)  1/4 of 1 percentage point. 
B)  1 percentage point. 
C)  2 percentage points. 
D)  5 percentage points. 
A)  1/4 of 1 percentage point. 
B)  1 percentage point. 
C)  2 percentage points. 
D)  5 percentage points.

Within the market for reserves,an increase in the quantity of reserves results in a

Monetary policy produces ripple effects,some of which happen quickly and some that can take years to produce change.Which of the following takes the longest to change?

In response to an inflationary gap,the Fed

Which of the following is a problem in pursuing monetary policy?

The Taylor Rule states that the

When the Fed lowers the federal funds rate,it increases reserves and increases the quantity of deposits and loans created.

When the Fed lowers the federal funds rate,

If the Fed raises the interest rate,the first effect in an AS/AD figure is a shift of the curve.

The Federal Reserve monetary policy goals of maximum employment means

To decrease inflation,the Federal Reserve would adjust its target for the federal funds rate upward.

Monetary policy is controlled by

Suppose that several European countries enter a recession decreasing U.S.exports.To move U.S.GDP back to potential GDP,the Fed should

Suppose in the money market the equilibrium interest rate is 5 percent and quantity of money demanded and supplied are both equal to $2 trillion dollars.If the Fed increases the quantity of money,what is the effect on the interest rate?

Ben Bernanke has suggested that a core inflation rate of ________ is the equivalent of price stability.

The key goal of monetary policy is to

One problem with the ripple effect from the Fed's monetary policy is

In 2012,the federal funds rate was 0.15 percent,which means that the opportunity cost of holding reserves was and consequently banks had a incentive to economize on reserves.

The central bank of Cobra sells securities in an open market operation.In the short run,aggregate demand ,real GDP ,and the price level .

Usually,the Federal Reserve changes its target for the federal funds rate in units of

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 14: Monetary Policy

Within the market for reserves,an increase in the quantity of reserves results in a

Monetary policy produces ripple effects,some of which happen quickly and some that can take years to produce change.Which of the following takes the longest to change?

In response to an inflationary gap,the Fed

Which of the following is a problem in pursuing monetary policy?

The Taylor Rule states that the

When the Fed lowers the federal funds rate,it increases reserves and increases the quantity of deposits and loans created.

When the Fed lowers the federal funds rate,

If the Fed raises the interest rate,the first effect in an AS/AD figure is a ________ shift of the ________ curve.

The Federal Reserve monetary policy goals of maximum employment means

To decrease inflation,the Federal Reserve would adjust its target for the federal funds rate upward.

Monetary policy is controlled by

Suppose that several European countries enter a recession decreasing U.S.exports.To move U.S.GDP back to potential GDP,the Fed should

Suppose in the money market the equilibrium interest rate is 5 percent and quantity of money demanded and supplied are both equal to $2 trillion dollars.If the Fed increases the quantity of money,what is the effect on the interest rate?

Ben Bernanke has suggested that a core inflation rate of ________ is the equivalent of price stability.

The key goal of monetary policy is to

One problem with the ripple effect from the Fed's monetary policy is

In 2012,the federal funds rate was 0.15 percent,which means that the opportunity cost of holding reserves was ________ and consequently banks had a ________ incentive to economize on reserves.

The central bank of Cobra sells securities in an open market operation.In the short run,aggregate demand ________,real GDP ________,and the price level ________.

Usually,the Federal Reserve changes its target for the federal funds rate in units of

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

If the Fed raises the interest rate,the first effect in an AS/AD figure is a shift of the curve.

In 2012,the federal funds rate was 0.15 percent,which means that the opportunity cost of holding reserves was and consequently banks had a incentive to economize on reserves.

The central bank of Cobra sells securities in an open market operation.In the short run,aggregate demand ,real GDP ,and the price level .