Question 1

The ________ determines the supply of money.

Accepted Answer

A)  Congress 
B)  President 
C)  Federal Reserve 
D)  banking system 
A)  Congress 
B)  President 
C)  Federal Reserve 
D)  banking system

Question 2

Both increases in the price level and increases in real GDP will decrease the demand for money.

Accepted Answer

A) True 
 B)False

Question 3

A change in the reserve requirement is used infrequently by the Fed because it

Accepted Answer

A)  is disruptive to the banking system. 
B)  does not influence the money supply. 
C)  does not affect bank reserves. 
D)  does not affect the money multiplier. 
A)  is disruptive to the banking system. 
B)  does not influence the money supply. 
C)  does not affect bank reserves. 
D)  does not affect the money multiplier.

Question 4

Recall the Application about the effectiveness of committees in making decisions about monetary policy to answer the following question(s). Former Fed vice-chairman Alan Blinder developed an experiment to see whether individuals or groups make better decisions, and who makes them more rapidly. The experiment tested how quickly individuals and groups could distinguish changes in underlying trends from random events, such as if a one-month unemployment rate increase was a temporary aberration or the possible beginning of a recession, and their decisions as to changing monetary policy as a reaction to the events.
-Recall the Application. The experiment conducted by Blinder showed that the actual process of having committee meetings and discussions

Accepted Answer

A)  tended to polarize the group into two distinct factions. 
B)  improved the group's overall performance. 
C)  magnified the individual group member's differences. 
D)  related to the average performance of the individual group members. 
A)  tended to polarize the group into two distinct factions. 
B)  improved the group's overall performance. 
C)  magnified the individual group member's differences. 
D)  related to the average performance of the individual group members.

Question 5

Based on the model of the money market, if the Federal Reserve increases the reserve requirement, the equilibrium interest rate should

Accepted Answer

A)  stay the same. 
B)  increase. 
C)  decrease. 
D)  increase to the same extent that the demand for money increases. 
A)  stay the same. 
B)  increase. 
C)  decrease. 
D)  increase to the same extent that the demand for money increases.

Question 6

When the Fed makes higher interest payments on bank reserves, banks will hold ________ reserves which will ________ the money supply.

Accepted Answer

A)  more; increase 
B)  more; decrease 
C)  less; increase 
D)  less; decrease 
A)  more; increase 
B)  more; decrease 
C)  less; increase 
D)  less; decrease

Question 7

An outside lag is

Accepted Answer

A)  a lag in implementing policy. 
B)  the period of time it takes for policies to work. 
C)  a policy aimed at increasing GDP. 
D)  a policy aimed at reducing GDP. 
A)  a lag in implementing policy. 
B)  the period of time it takes for policies to work. 
C)  a policy aimed at increasing GDP. 
D)  a policy aimed at reducing GDP.

Question 8

The supply of money is determined by the Federal Reserve and is dependent on the demand for money.

Accepted Answer

A) True 
 B)False

Question 9

An increase in the money supply will appreciate a country's currency.

Accepted Answer

A) True 
 B)False

Question 10

An open market purchase by the Fed causes the value of the dollar to

Accepted Answer

A)  rise, increasing net exports. 
B)  rise, reducing net exports. 
C)  fall, increasing net exports. 
D)  fall, reducing net exports. 
A)  rise, increasing net exports. 
B)  rise, reducing net exports. 
C)  fall, increasing net exports. 
D)  fall, reducing net exports.

Question 11

Lower U.S. interest rates cause the value of the dollar to

Accepted Answer

A)  rise, making U.S. goods relatively cheaper on world markets. 
B)  rise, making U.S. goods relatively more expensive on world markets. 
C)  fall, making U.S. goods relatively cheaper on world markets. 
D)  fall, making U.S. goods relatively more expensive on world markets. 
A)  rise, making U.S. goods relatively cheaper on world markets. 
B)  rise, making U.S. goods relatively more expensive on world markets. 
C)  fall, making U.S. goods relatively cheaper on world markets. 
D)  fall, making U.S. goods relatively more expensive on world markets.

Question 12

The Fed can change the money supply by buying or selling long-term Treasury bonds. Purchasing long-term securities is commonly called

Accepted Answer

A)  open market operations. 
B)  discount operations. 
C)  federal funds speculation. 
D)  quantitative easing. 
A)  open market operations. 
B)  discount operations. 
C)  federal funds speculation. 
D)  quantitative easing.

Question 13

A decrease in the reserve requirement

Accepted Answer

A)  increases the money supply, which leads to increased interest rates and a fall in investment spending. 
B)  increases the money supply, which leads to decreased interest rates and a rise in investment spending. 
C)  decreases the money supply, which leads to increased interest rates and a fall in investment spending. 
D)  decreases the money supply, which leads to decreased interest rates and a rise in investment spending. 
A)  increases the money supply, which leads to increased interest rates and a fall in investment spending. 
B)  increases the money supply, which leads to decreased interest rates and a rise in investment spending. 
C)  decreases the money supply, which leads to increased interest rates and a fall in investment spending. 
D)  decreases the money supply, which leads to decreased interest rates and a rise in investment spending.

Question 14

The real rate of interest is defined as the

Accepted Answer

A)  expected inflation rate minus the nominal interest rate. 
B)  expected inflation rate plus the nominal interest rate. 
C)  nominal interest rate minus the expected inflation rate. 
D)  nominal inflation rate plus the expected inflation rate. 
A)  expected inflation rate minus the nominal interest rate. 
B)  expected inflation rate plus the nominal interest rate. 
C)  nominal interest rate minus the expected inflation rate. 
D)  nominal inflation rate plus the expected inflation rate.

Question 15

When the Federal Reserve decreases the money supply, it generally does so by purchasing bonds.

Accepted Answer

A) True 
 B)False

Question 16

What is the "good news" and the "bad news" about a higher value of the U.S. dollar?

Accepted Answer

The "good news" about a higher value of

Question 17

A decrease in the value of a currency is called a(n)

Accepted Answer

A)  depreciation. 
B)  appreciation. 
C)  consolation. 
D)  integration. 
A)  depreciation. 
B)  appreciation. 
C)  consolation. 
D)  integration.

Question 18

Which of the following factors does NOT shift the demand curve for money?

Accepted Answer

A)  changes in the interest rate 
B)  changes in the price level in the economy 
C)  changes in real income 
D)  changes in real GDP 
A)  changes in the interest rate 
B)  changes in the price level in the economy 
C)  changes in real income 
D)  changes in real GDP

Question 19

How can the Federal Reserve actually increase the money supply?

Accepted Answer

A)  by delaying transfer of money among banks 
B)  by raising the discount rate 
C)  by doubling the reserve requirement 
D)  by purchasing more government bonds in the open market 
A)  by delaying transfer of money among banks 
B)  by raising the discount rate 
C)  by doubling the reserve requirement 
D)  by purchasing more government bonds in the open market

Question 20

When people expect inflation, they assume that prices are going to increase at a certain rate and factor this into their decision making.

Accepted Answer

A) True 
 B)False

The ________ determines the supply of money.

Both increases in the price level and increases in real GDP will decrease the demand for money.

A change in the reserve requirement is used infrequently by the Fed because it

Based on the model of the money market, if the Federal Reserve increases the reserve requirement, the equilibrium interest rate should

When the Fed makes higher interest payments on bank reserves, banks will hold reserves which will the money supply.

An outside lag is

The supply of money is determined by the Federal Reserve and is dependent on the demand for money.

An increase in the money supply will appreciate a country's currency.

An open market purchase by the Fed causes the value of the dollar to

Lower U.S. interest rates cause the value of the dollar to

The Fed can change the money supply by buying or selling long-term Treasury bonds. Purchasing long-term securities is commonly called

A decrease in the reserve requirement

The real rate of interest is defined as the

When the Federal Reserve decreases the money supply, it generally does so by purchasing bonds.

What is the "good news" and the "bad news" about a higher value of the U.S. dollar?

A decrease in the value of a currency is called a(n)

Which of the following factors does NOT shift the demand curve for money?

How can the Federal Reserve actually increase the money supply?

When people expect inflation, they assume that prices are going to increase at a certain rate and factor this into their decision making.

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Elasticity: A Measure of Responsiveness

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

Imperfect Information, External Benefits, and External Costs

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and the Banking System

International Trade and Finance

Filters

Exam 17: Monetary Policy and Inflation

The ________ determines the supply of money.

Both increases in the price level and increases in real GDP will decrease the demand for money.

A change in the reserve requirement is used infrequently by the Fed because it

Based on the model of the money market, if the Federal Reserve increases the reserve requirement, the equilibrium interest rate should

When the Fed makes higher interest payments on bank reserves, banks will hold ________ reserves which will ________ the money supply.

An outside lag is

The supply of money is determined by the Federal Reserve and is dependent on the demand for money.

An increase in the money supply will appreciate a country's currency.

An open market purchase by the Fed causes the value of the dollar to

Lower U.S. interest rates cause the value of the dollar to

The Fed can change the money supply by buying or selling long-term Treasury bonds. Purchasing long-term securities is commonly called

A decrease in the reserve requirement

The real rate of interest is defined as the

When the Federal Reserve decreases the money supply, it generally does so by purchasing bonds.

What is the "good news" and the "bad news" about a higher value of the U.S. dollar?

A decrease in the value of a currency is called a(n)

Which of the following factors does NOT shift the demand curve for money?

How can the Federal Reserve actually increase the money supply?

When people expect inflation, they assume that prices are going to increase at a certain rate and factor this into their decision making.

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Elasticity: A Measure of Responsiveness

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

Imperfect Information, External Benefits, and External Costs

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and the Banking System

International Trade and Finance

Filters

When the Fed makes higher interest payments on bank reserves, banks will hold reserves which will the money supply.