Question 1

The MP curve indicates the relationship between ________ and the ________.

Accepted Answer

A) taxes;price level 
B) the real interest rate;inflation rate 
C) monetary policy;IS curve 
D) all of the above 
E) none of the above 
A) taxes;price level 
B) the real interest rate;inflation rate 
C) monetary policy;IS curve 
D) all of the above 
E) none of the above

Question 2

The liquidity preference function shows that as ________.

Accepted Answer

A) real income decreases,so does the demand for real money balances 
B) the nominal interest rate increases,so does the demand for real money balances 
C) real income decreases,so does the real interest rate 
D) all of the above 
E) none of the above 
A) real income decreases,so does the demand for real money balances 
B) the nominal interest rate increases,so does the demand for real money balances 
C) real income decreases,so does the real interest rate 
D) all of the above 
E) none of the above

Question 3

In the aggregate demand curve,the endogenous variable is ________.

Accepted Answer

A) output 
B) inflation 
C) the real interest rate 
D) real money balances 
E) none of the above 
A) output 
B) inflation 
C) the real interest rate 
D) real money balances 
E) none of the above

Question 4

When the Federal Reserve ________.

Accepted Answer

A) drains liquidity,the federal funds rate falls 
B) drains liquidity,real interest rates fall 
C) provides more liquidity,the federal funds rate falls 
D) all of the above 
E) none of the above 
A) drains liquidity,the federal funds rate falls 
B) drains liquidity,real interest rates fall 
C) provides more liquidity,the federal funds rate falls 
D) all of the above 
E) none of the above

Question 5

________ is a good measure of the opportunity cost of holding money.

Accepted Answer

A) The real interest rate 
B) Liquidity preference 
C) Real income 
D) The inflation rate 
E) none of the above 
A) The real interest rate 
B) Liquidity preference 
C) Real income 
D) The inflation rate 
E) none of the above

Question 6

The demand for real money balances ________.

Accepted Answer

A) is downward sloping with respect to prices 
B) is downward sloping with respect to interest rates 
C) is downward sloping with respect to income 
D) all of the above 
E) none of the above 
A) is downward sloping with respect to prices 
B) is downward sloping with respect to interest rates 
C) is downward sloping with respect to income 
D) all of the above 
E) none of the above

Question 7

Before the financial crisis of 2007,inflation was on the rise.According to the MP curve,this would lead to ________.

Accepted Answer

A) an increase in the real interest rate 
B) an upward shift of the MP curve,if policymakers opted for autonomous tightening 
C) a decrease in aggregate output 
D) all of the above 
E) none of the above 
A) an increase in the real interest rate 
B) an upward shift of the MP curve,if policymakers opted for autonomous tightening 
C) a decrease in aggregate output 
D) all of the above 
E) none of the above

Question 8

If people begin to generally feel better about the future ________.

Accepted Answer

A) autonomous consumption should rise 
B) autonomous investment should rise 
C) the AD curve will shift to the right 
D) all of the above 
E) none of the above 
A) autonomous consumption should rise 
B) autonomous investment should rise 
C) the AD curve will shift to the right 
D) all of the above 
E) none of the above

Question 9

Typically,central banks increase the supply of money by ________.

Accepted Answer

A) buying bonds from banks 
B) printing currency 
C) directing the government to issue more money to banks 
D) all of the above 
E) none of the above 
A) buying bonds from banks 
B) printing currency 
C) directing the government to issue more money to banks 
D) all of the above 
E) none of the above

Question 10

The IS curve is Y = 20 - 1.5r,and the aggregate demand curve is Y = 15.5 - 0.3π.The monetary policy curve is ________.

Accepted Answer

A) r = 4.5 - 1.8π 
B) r = 20 + 0.3π 
C) r = 3 + 0.2π 
D) Y = 17.75 + 0.6π 
E) none of the above 
A) r = 4.5 - 1.8π 
B) r = 20 + 0.3π 
C) r = 3 + 0.2π 
D) Y = 17.75 + 0.6π 
E) none of the above

Question 11

The IS curve is Y = 20 - 1.5r,and the aggregate demand curve is Y = 15.5 - 0.3π.When the interest rate is 7 percent,the inflation rate is ________ percent.

Accepted Answer

A) 14.6 
B) 9.5 
C) 3.6 
D) 20 
E) none of the above 
A) 14.6 
B) 9.5 
C) 3.6 
D) 20 
E) none of the above

Question 12

On the graph above,which pair of points best represents the impacts in the U.S.of the financial crisis and policy response from 2007 through 2008?

Accepted Answer

A) H to I 
B) K to G 
C) I to H 
D) K to F 
E) G to J 
A) H to I 
B) K to G 
C) I to H 
D) K to F 
E) G to J

Question 13

Which of the following is true about the Taylor principle?

Accepted Answer

A) it explains the link between higher inflation and higher real interest rates 
B) it is the foundation for an upward sloping MP curve 
C) it reflects the practice of monetary policy 
D) all of the above 
E) none of the above 
A) it explains the link between higher inflation and higher real interest rates 
B) it is the foundation for an upward sloping MP curve 
C) it reflects the practice of monetary policy 
D) all of the above 
E) none of the above

Question 14

If the Federal Reserve raises interest rates in an autonomous tightening ________.

Accepted Answer

A) the MP curve shifts up,raising the real interest for any given level of the inflation rate 
B) there is an upward movement along the IS curve 
C) the AD curve shifts to the left 
D) all of the above 
E) none of the above 
A) the MP curve shifts up,raising the real interest for any given level of the inflation rate 
B) there is an upward movement along the IS curve 
C) the AD curve shifts to the left 
D) all of the above 
E) none of the above

Question 15

The MP curve may be used to represent how ________.

Accepted Answer

A) movements of the inflation rate are determined by the real interest rate 
B) monetary policy responds to changes in the real interest rate 
C) movements of the real interest rate are related to the inflation rate 
D) all of the above 
E) none of the above 
A) movements of the inflation rate are determined by the real interest rate 
B) monetary policy responds to changes in the real interest rate 
C) movements of the real interest rate are related to the inflation rate 
D) all of the above 
E) none of the above

Question 16

-Referring to the graph above,a movement from point H to point I might represent ________.

Accepted Answer

A) the increase in the inflation rate that occurs when the real interest rate rises 
B) the automatic response of monetary policy to an increase in the inflation rate 
C) an autonomous tightening of monetary policy 
D) any of the above 
E) none of the above 
A) the increase in the inflation rate that occurs when the real interest rate rises 
B) the automatic response of monetary policy to an increase in the inflation rate 
C) an autonomous tightening of monetary policy 
D) any of the above 
E) none of the above

Question 17

Factors that shift the AD Curve include ________.

Accepted Answer

A) autonomous net exports 
B) autonomous inflation 
C) autonomous interest rates 
D) all of the above 
E) none of the above 
A) autonomous net exports 
B) autonomous inflation 
C) autonomous interest rates 
D) all of the above 
E) none of the above

Question 18

Increased liquidity in the banking system occurs when ________.

Accepted Answer

A) people buy more bonds 
B) the demand for real money balances declines 
C) banks buy more bonds from the central bank 
D) all of the above 
E) none of the above 
A) people buy more bonds 
B) the demand for real money balances declines 
C) banks buy more bonds from the central bank 
D) all of the above 
E) none of the above

Question 19

The Federal Reserve ________.

Accepted Answer

A) sets the federal funds rate once a year 
B) controls the interest rate in the short run 
C) controls the interest rate in the long run 
D) all of the above 
E) none of the above 
A) sets the federal funds rate once a year 
B) controls the interest rate in the short run 
C) controls the interest rate in the long run 
D) all of the above 
E) none of the above

Question 20

A decision to increase the parameter λ in the MP curve is an example of ________.

Accepted Answer

A) autonomous easing 
B) leftward movement along the curve 
C) rightward movement along the curve 
D) endogenous response 
E) autonomous tightening 
A) autonomous easing 
B) leftward movement along the curve 
C) rightward movement along the curve 
D) endogenous response 
E) autonomous tightening

Exam 10: Monetary Policy and Aggregate Demand

The MP curve indicates the relationship between ________ and the ________.

The liquidity preference function shows that as ________.

In the aggregate demand curve,the endogenous variable is ________.

When the Federal Reserve ________.

________ is a good measure of the opportunity cost of holding money.

The demand for real money balances ________.

Before the financial crisis of 2007,inflation was on the rise.According to the MP curve,this would lead to ________.

If people begin to generally feel better about the future ________.

Typically,central banks increase the supply of money by ________.

The IS curve is Y = 20 - 1.5r,and the aggregate demand curve is Y = 15.5 - 0.3π.The monetary policy curve is ________.

The IS curve is Y = 20 - 1.5r,and the aggregate demand curve is Y = 15.5 - 0.3π.When the interest rate is 7 percent,the inflation rate is ________ percent.

On the graph above,which pair of points best represents the impacts in the U.S.of the financial crisis and policy response from 2007 through 2008?

Which of the following is true about the Taylor principle?

If the Federal Reserve raises interest rates in an autonomous tightening ________.

The MP curve may be used to represent how ________.

-Referring to the graph above,a movement from point H to point I might represent ________.

Factors that shift the AD Curve include ________.

Increased liquidity in the banking system occurs when ________.

The Federal Reserve ________.

A decision to increase the parameter λ in the MP curve is an example of ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Aggregate Supply and the Phillips Curve

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

Filters

The MP curve indicates the relationship between and the .