Question 1

Alan Greenspan,who preceded Ben Bernanke as Fed chairman,was a proponent of

Accepted Answer

A)  discretionary intervention. 
B)  a rules-based approach to monetary policy. 
C)  inflation targeting. 
D)  fiscal policy. 
A)  discretionary intervention. 
B)  a rules-based approach to monetary policy. 
C)  inflation targeting. 
D)  fiscal policy. A

Question 2

Monetary stimulus requires about __________ for its full effect.

Accepted Answer

A)  3 to 6 months 
B)  6 to 12 months 
C)  12 to 18 months 
D)  18 to 24 months 
A)  3 to 6 months 
B)  6 to 12 months 
C)  12 to 18 months 
D)  18 to 24 months C

Question 3

If the Federal Reserve increases the federal funds rate dramatically,which of the following would we expect to happen?

Accepted Answer

A)  The price of houses would increase. 
B)  The amount of credit card borrowing would increase. 
C)  The price of cars would decrease. 
D)  People with adjustable-rate mortgages would be better off. 
A)  The price of houses would increase. 
B)  The amount of credit card borrowing would increase. 
C)  The price of cars would decrease. 
D)  People with adjustable-rate mortgages would be better off. C

Question 4

Reducing the fed funds rate can increase GDP in the short term because at lower interest rates

Accepted Answer

A)  individuals and businesses will want to borrow and spend more. 
B)  households will attempt to save more. 
C)  banks will earn greater profits on loans. 
D)  taxes are lower, which increases disposable income. 
A)  individuals and businesses will want to borrow and spend more. 
B)  households will attempt to save more. 
C)  banks will earn greater profits on loans. 
D)  taxes are lower, which increases disposable income.

Question 5

Generally,if the inflation rate is too high,the Federal Reserve will want to raise the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 6

Money enables us to make comparisons of value among goods and services.This is the ________ use of money.

Accepted Answer

A)  medium of exchange 
B)  store of value 
C)  standard of value 
D)  inflationary 
A)  medium of exchange 
B)  store of value 
C)  standard of value 
D)  inflationary

Question 7

The Federal Reserve's response to the 2001 recession was to

Accepted Answer

A)  cut the federal funds rate over a three-year period. 
B)  lower the reserve requirement. 
C)  raise the margin requirement and lower the reserve requirement. 
D)  lower the money supply by 7% in order to reduce overinflated stock prices. 
A)  cut the federal funds rate over a three-year period. 
B)  lower the reserve requirement. 
C)  raise the margin requirement and lower the reserve requirement. 
D)  lower the money supply by 7% in order to reduce overinflated stock prices.

Question 8

The current chairman of the Federal Reserve is Alan Greenspan.

Accepted Answer

A) True 
 B)False

Question 9

People who have bought a house using an adjustable-rate mortgage are most likely to be hurt by

Accepted Answer

A)  an increase in the inflation rate. 
B)  an increase in the amount of the Fed's discount lending. 
C)  a decrease in the reserve requirement. 
D)  an increase in the federal funds rate. 
A)  an increase in the inflation rate. 
B)  an increase in the amount of the Fed's discount lending. 
C)  a decrease in the reserve requirement. 
D)  an increase in the federal funds rate.

Question 10

Alan Greenspan argued that a low,stable inflation rate was the best way to achieve

Accepted Answer

A)  low unemployment. 
B)  low interest rates. 
C)  strong economic growth. 
D)  low, stable oil prices. 
A)  low unemployment. 
B)  low interest rates. 
C)  strong economic growth. 
D)  low, stable oil prices.

Question 11

Which of the following is a tool of the Federal Reserve System?

Accepted Answer

A)  Buying or selling stocks of publicly traded corporations in order to stabilize the stock market 
B)  Performing open market operations in order to stimulate the economy during recessions and prevent inflation. 
C)  Reducing the burden of household debt by capping credit card and other loan interest rates at reasonable levels. 
D)  Encouraging employment by lending money at a low ("discount") rate to firms that are in danger of having to make layoffs. 
A)  Buying or selling stocks of publicly traded corporations in order to stabilize the stock market 
B)  Performing open market operations in order to stimulate the economy during recessions and prevent inflation. 
C)  Reducing the burden of household debt by capping credit card and other loan interest rates at reasonable levels. 
D)  Encouraging employment by lending money at a low ("discount") rate to firms that are in danger of having to make layoffs.

Question 12

In the aftermath of the terrorist attacks of September 11,2001,__________ banks failed because of the disruption to business on Wall Street.

Accepted Answer

A)  no 
B)  only 2 
C)  50 percent of all 
D)  1 in 10 
A)  no 
B)  only 2 
C)  50 percent of all 
D)  1 in 10

Question 13

How does a "rules-based" approach to monetary policy differ from "discretionary intervention"?

Accepted Answer

A rules-based approach does not leave th

Question 14

The Fed's margin requirements control

Accepted Answer

A)  how much people can borrow when they buy stock. 
B)  the amount of reserves banks must keep in cash or in their accounts with the Federal Reserve. 
C)  the federal funds rate. 
D)  the interest rate banks are allowed to pay on demand deposit accounts. 
A)  how much people can borrow when they buy stock. 
B)  the amount of reserves banks must keep in cash or in their accounts with the Federal Reserve. 
C)  the federal funds rate. 
D)  the interest rate banks are allowed to pay on demand deposit accounts.

Question 15

One of the goals of monetary policy is to make sure that the inflation rate and the overall rate of growth in the economy are the same.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would shift the demand curve for cars to the right?

Accepted Answer

A)  An increase in the federal funds rate. 
B)  An increase in discount lending by the Fed to banks. 
C)  An increase in home mortgage interest rates. 
D)  An increase in the unemployment rate over the NAIRU. 
A)  An increase in the federal funds rate. 
B)  An increase in discount lending by the Fed to banks. 
C)  An increase in home mortgage interest rates. 
D)  An increase in the unemployment rate over the NAIRU.

Question 17

Show,using a supply-and-demand diagram,what would happen to the short-term interest rate (that is,the federal funds rate)if the Federal Reserve increases the amount of money available to banks to lend.

Accepted Answer

By making more money available

Question 18

If a major crash of the financial system began,the Federal Reserve would

Accepted Answer

A)  provide money to banks in order to reassure investors and prevent banks from going bankrupt. 
B)  immediately reduce the money supply to stop people from withdrawing cash from their banks. 
C)  raise interest rates in order to provide banks with a more secure stream of income. 
D)  prop up stock prices by buying stocks in the 500 largest corporations. 
A)  provide money to banks in order to reassure investors and prevent banks from going bankrupt. 
B)  immediately reduce the money supply to stop people from withdrawing cash from their banks. 
C)  raise interest rates in order to provide banks with a more secure stream of income. 
D)  prop up stock prices by buying stocks in the 500 largest corporations.

Question 19

The target federal funds rate is set by the

Accepted Answer

A)  chairman of the Federal Reserve Board. 
B)  president of the United States. 
C)  secretary of the Treasury. 
D)  Fed's Open Market Committee. 
A)  chairman of the Federal Reserve Board. 
B)  president of the United States. 
C)  secretary of the Treasury. 
D)  Fed's Open Market Committee.

Question 20

If the Federal Reserve raises the federal funds rate,which one of the following will not tend to happen as a result?

Accepted Answer

A)  Economic activity will decrease. 
B)  Car loan and home mortgage rates will rise. 
C)  Businesses will find it easier to obtain funds to expand. 
D)  Inflation will decline. 
A)  Economic activity will decrease. 
B)  Car loan and home mortgage rates will rise. 
C)  Businesses will find it easier to obtain funds to expand. 
D)  Inflation will decline.

Alan Greenspan,who preceded Ben Bernanke as Fed chairman,was a proponent of

Monetary stimulus requires about __________ for its full effect.

If the Federal Reserve increases the federal funds rate dramatically,which of the following would we expect to happen?

Reducing the fed funds rate can increase GDP in the short term because at lower interest rates

Generally,if the inflation rate is too high,the Federal Reserve will want to raise the federal funds rate.

Money enables us to make comparisons of value among goods and services.This is the ________ use of money.

The Federal Reserve's response to the 2001 recession was to

The current chairman of the Federal Reserve is Alan Greenspan.

People who have bought a house using an adjustable-rate mortgage are most likely to be hurt by

Alan Greenspan argued that a low,stable inflation rate was the best way to achieve

Which of the following is a tool of the Federal Reserve System?

In the aftermath of the terrorist attacks of September 11,2001,__________ banks failed because of the disruption to business on Wall Street.

How does a "rules-based" approach to monetary policy differ from "discretionary intervention"?

The Fed's margin requirements control

One of the goals of monetary policy is to make sure that the inflation rate and the overall rate of growth in the economy are the same.

Which of the following would shift the demand curve for cars to the right?

Show,using a supply-and-demand diagram,what would happen to the short-term interest rate (that is,the federal funds rate)if the Federal Reserve increases the amount of money available to banks to lend.

If a major crash of the financial system began,the Federal Reserve would

The target federal funds rate is set by the

If the Federal Reserve raises the federal funds rate,which one of the following will not tend to happen as a result?

Introduction

Demand and Supply: The Basics of the Market Economy

Market Equilibrium and Shifts

How Businesses Work

Competition and Market Power

Government and the Economy

The First Step Into Macroeconomics

Inflation

Growth

Business Cycles, unemployment and Inflation

Fiscal Policy

The Financial Markets

International Trade

Technological Change

Economics of the Labor Market

The Distribution of Income

Economics of Retirement and Healthcare

Economics of Energy, the Environment, and Global Climate Change Glossary

Filters

Exam 12: Monetary Policy

Alan Greenspan,who preceded Ben Bernanke as Fed chairman,was a proponent of

Monetary stimulus requires about __________ for its full effect.

If the Federal Reserve increases the federal funds rate dramatically,which of the following would we expect to happen?

Reducing the fed funds rate can increase GDP in the short term because at lower interest rates

Generally,if the inflation rate is too high,the Federal Reserve will want to raise the federal funds rate.

Money enables us to make comparisons of value among goods and services.This is the ________ use of money.

The Federal Reserve's response to the 2001 recession was to

The current chairman of the Federal Reserve is Alan Greenspan.

People who have bought a house using an adjustable-rate mortgage are most likely to be hurt by

Alan Greenspan argued that a low,stable inflation rate was the best way to achieve

Which of the following is a tool of the Federal Reserve System?

In the aftermath of the terrorist attacks of September 11,2001,__________ banks failed because of the disruption to business on Wall Street.

How does a "rules-based" approach to monetary policy differ from "discretionary intervention"?

The Fed's margin requirements control

One of the goals of monetary policy is to make sure that the inflation rate and the overall rate of growth in the economy are the same.

Which of the following would shift the demand curve for cars to the right?

Show,using a supply-and-demand diagram,what would happen to the short-term interest rate (that is,the federal funds rate)if the Federal Reserve increases the amount of money available to banks to lend.

If a major crash of the financial system began,the Federal Reserve would

The target federal funds rate is set by the

If the Federal Reserve raises the federal funds rate,which one of the following will not tend to happen as a result?

Introduction

Demand and Supply: The Basics of the Market Economy

Market Equilibrium and Shifts

How Businesses Work

Competition and Market Power

Government and the Economy

The First Step Into Macroeconomics

Inflation

Growth

Business Cycles, unemployment and Inflation

Fiscal Policy

The Financial Markets

International Trade

Technological Change

Economics of the Labor Market

The Distribution of Income

Economics of Retirement and Healthcare

Economics of Energy, the Environment, and Global Climate Change Glossary

Filters