Question 1

Figure 15-8  
-Refer to Figure 15-8.In the figure above,if the economy is at point A,the appropriate monetary policy by the Federal Reserve would be to

Accepted Answer

A) lower interest rates. 
B) raise interest rates. 
C) lower income taxes. 
D) raise income taxes. 
A) lower interest rates. 
B) raise interest rates. 
C) lower income taxes. 
D) raise income taxes. B

Question 2

A decrease in real GDP can

Accepted Answer

A) shift money demand to the right and decrease the interest rate. 
B) shift money demand to the right and increase the interest rate. 
C) shift money demand to the left and decrease the interest rate. 
D) shift money demand to the left and increase the interest rate. 
A) shift money demand to the right and decrease the interest rate. 
B) shift money demand to the right and increase the interest rate. 
C) shift money demand to the left and decrease the interest rate. 
D) shift money demand to the left and increase the interest rate. C

Question 3

One of the monetary policy goals of the Federal Reserve is price stability.

Accepted Answer

A) True 
 B)False  True

Question 4

The money demand curve has a

Accepted Answer

A) negative slope because an increase in the interest rate decreases the quantity of money demanded. 
B) positive slope because an increase in the interest rate increases the quantity of money demanded. 
C) negative slope because an increase in the price level decreases the quantity of money demanded. 
D) positive slope because an increase in the price level increases the quantity of money demanded. 
A) negative slope because an increase in the interest rate decreases the quantity of money demanded. 
B) positive slope because an increase in the interest rate increases the quantity of money demanded. 
C) negative slope because an increase in the price level decreases the quantity of money demanded. 
D) positive slope because an increase in the price level increases the quantity of money demanded.

Question 5

Suppose that the Federal Reserve Open Market Committee adheres to the ideas expressed by ________.If the economy moves into a recession,the Fed would recommend that the federal funds target rate decrease as long as the inflation rate did not rise above the publicly announced goal for inflation.

Accepted Answer

A) the gold standard 
B) the monetarist school of thought 
C) inflation targeting 
D) the Taylor Rule 
A) the gold standard 
B) the monetarist school of thought 
C) inflation targeting 
D) the Taylor Rule

Question 6

Using the Taylor rule,if the current inflation rate exceeds the target inflation rate and real GDP exceeds potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

Accepted Answer

A) will be greater than 
B) will be less than 
C) will be the same as 
D) may be greater than or less than 
A) will be greater than 
B) will be less than 
C) will be the same as 
D) may be greater than or less than

Question 7

Figure 15-11
 
-Refer to Figure 15-11.In the dynamic model of AD-AS in the figure above,the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues policy.This will result in

Accepted Answer

A) unemployment rates higher than what would occur if no policy had been pursued. 
B) inflation higher than what would occur if no policy had been pursued. 
C) real GDP lower than what would occur if no policy had been pursued. 
D) short-term interest rates higher than what would occur if no policy had been pursued. 
A) unemployment rates higher than what would occur if no policy had been pursued. 
B) inflation higher than what would occur if no policy had been pursued. 
C) real GDP lower than what would occur if no policy had been pursued. 
D) short-term interest rates higher than what would occur if no policy had been pursued.

Question 8

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is less than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

Accepted Answer

A) will be greater than 
B) will be less than 
C) will be the same as 
D) may be greater than or less than 
A) will be greater than 
B) will be less than 
C) will be the same as 
D) may be greater than or less than

Question 9

What is a mortgage? What were the important developments in the mortgage market during the years after 1970?

Accepted Answer

A mortgage is a loan a borrower takes to

Question 10

The Fed uses a "core" price index,one that excludes food and energy prices to measure inflation.It does so because

Accepted Answer

A) food and energy are inelastic goods and consumers will buy them regardless of their price. 
B) it wants to avoid the blame for high gasoline prices causing inflation. 
C) food and energy prices have wide swings that are not related to the causes of general inflation. 
D) food and energy prices do not change all that much during the short run,so are irrelevant to the calculation of inflation. 
A) food and energy are inelastic goods and consumers will buy them regardless of their price. 
B) it wants to avoid the blame for high gasoline prices causing inflation. 
C) food and energy prices have wide swings that are not related to the causes of general inflation. 
D) food and energy prices do not change all that much during the short run,so are irrelevant to the calculation of inflation.

Question 11

Suppose the equilibrium real federal funds rate is 5 percent,the target rate of inflation is 3 percent,the current inflation rate is 5 percent,and real GDP is 4 percent above potential real GDP.If the weights for the inflation gap and the output gap are both 1/2,then according to the Taylor rule the federal funds target rate equals

Accepted Answer

A) 1 percent. 
B) 9 percent. 
C) 13 percent. 
D) 17 percent. 
A) 1 percent. 
B) 9 percent. 
C) 13 percent. 
D) 17 percent.

Question 12

The main goal of monetary policy for recent Fed Chairmen has been to maintain high employment in labor markets.

Accepted Answer

A) True 
 B)False

Question 13

Contractionary monetary policy on the part of the Fed results in

Accepted Answer

A) an increase in the money supply,an increase in interest rates,and an increase in GDP. 
B) a decrease in the money supply,an increase in interest rates,and a decrease in GDP. 
C) an increase in the money supply,a decrease in interest rates,and an increase in GDP. 
D) a decrease in the money supply,a decrease in interest rates,and a decrease in GDP. 
A) an increase in the money supply,an increase in interest rates,and an increase in GDP. 
B) a decrease in the money supply,an increase in interest rates,and a decrease in GDP. 
C) an increase in the money supply,a decrease in interest rates,and an increase in GDP. 
D) a decrease in the money supply,a decrease in interest rates,and a decrease in GDP.

Question 14

The rate of interest banks charge other banks for overnight loans of reserves is the

Accepted Answer

A) discount rate. 
B) prime rate. 
C) federal funds rate 
D) real rate. 
A) discount rate. 
B) prime rate. 
C) federal funds rate 
D) real rate.

Question 15

The smaller the fraction of an investment financed by borrowing,

Accepted Answer

A) the greater the potential return and potential loss on that investment. 
B) the smaller the potential return and potential loss on that investment. 
C) the greater the potential return and the smaller the potential loss on that investment. 
D) the smaller the potential return and the greater the potential loss on that investment. 
A) the greater the potential return and potential loss on that investment. 
B) the smaller the potential return and potential loss on that investment. 
C) the greater the potential return and the smaller the potential loss on that investment. 
D) the smaller the potential return and the greater the potential loss on that investment.

Question 16

The Federal Reserve's performance in the mid-to-late 1980s,1990s,and early 2000s has received high marks from economists,even without inflation targeting.

Accepted Answer

A) True 
 B)False

Question 17

Expansionary monetary policy enacted during a recession will cause the inflation rate to increase.

Accepted Answer

A) True 
 B)False

Question 18

The interest rate that banks charge other banks for overnight loans is the

Accepted Answer

A) prime rate. 
B) discount rate. 
C) federal funds rate. 
D) Treasury bill rate. 
A) prime rate. 
B) discount rate. 
C) federal funds rate. 
D) Treasury bill rate.

Question 19

Maintaining a strong dollar in international currency markets is not one of the four monetary policy goals of the Fed listed in the textbook.

Accepted Answer

A) True 
 B)False

Question 20

The monetary policy target the Federal Reserve focuses primarily on today is

Accepted Answer

A) the unemployment rate. 
B) M1. 
C) the inflation rate. 
D) the interest rate. 
E) M2. 
A) the unemployment rate. 
B) M1. 
C) the inflation rate. 
D) the interest rate. 
E) M2.

Figure 15-8 -Refer to Figure 15-8.In the figure above,if the economy is at point A,the appropriate monetary policy by the Federal Reserve would be to

A decrease in real GDP can

One of the monetary policy goals of the Federal Reserve is price stability.

The money demand curve has a

Suppose that the Federal Reserve Open Market Committee adheres to the ideas expressed by ________.If the economy moves into a recession,the Fed would recommend that the federal funds target rate decrease as long as the inflation rate did not rise above the publicly announced goal for inflation.

Using the Taylor rule,if the current inflation rate exceeds the target inflation rate and real GDP exceeds potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

Figure 15-11 -Refer to Figure 15-11.In the dynamic model of AD-AS in the figure above,the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues policy.This will result in

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is less than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

What is a mortgage? What were the important developments in the mortgage market during the years after 1970?

The Fed uses a "core" price index,one that excludes food and energy prices to measure inflation.It does so because

The main goal of monetary policy for recent Fed Chairmen has been to maintain high employment in labor markets.

Contractionary monetary policy on the part of the Fed results in

The rate of interest banks charge other banks for overnight loans of reserves is the

The smaller the fraction of an investment financed by borrowing,

The Federal Reserve's performance in the mid-to-late 1980s,1990s,and early 2000s has received high marks from economists,even without inflation targeting.

Expansionary monetary policy enacted during a recession will cause the inflation rate to increase.

The interest rate that banks charge other banks for overnight loans is the

Maintaining a strong dollar in international currency markets is not one of the four monetary policy goals of the Fed listed in the textbook.

The monetary policy target the Federal Reserve focuses primarily on today is

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 15: Monetary Policy

Figure 15-8 -Refer to Figure 15-8.In the figure above,if the economy is at point A,the appropriate monetary policy by the Federal Reserve would be to

A decrease in real GDP can

One of the monetary policy goals of the Federal Reserve is price stability.

The money demand curve has a

Suppose that the Federal Reserve Open Market Committee adheres to the ideas expressed by ________.If the economy moves into a recession,the Fed would recommend that the federal funds target rate decrease as long as the inflation rate did not rise above the publicly announced goal for inflation.

Using the Taylor rule,if the current inflation rate exceeds the target inflation rate and real GDP exceeds potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

Figure 15-11 -Refer to Figure 15-11.In the dynamic model of AD-AS in the figure above,the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues policy.This will result in

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is less than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

What is a mortgage? What were the important developments in the mortgage market during the years after 1970?

The Fed uses a "core" price index,one that excludes food and energy prices to measure inflation.It does so because

The main goal of monetary policy for recent Fed Chairmen has been to maintain high employment in labor markets.

Contractionary monetary policy on the part of the Fed results in

The rate of interest banks charge other banks for overnight loans of reserves is the

The smaller the fraction of an investment financed by borrowing,

The Federal Reserve's performance in the mid-to-late 1980s,1990s,and early 2000s has received high marks from economists,even without inflation targeting.

Expansionary monetary policy enacted during a recession will cause the inflation rate to increase.

The interest rate that banks charge other banks for overnight loans is the

Maintaining a strong dollar in international currency markets is not one of the four monetary policy goals of the Fed listed in the textbook.

The monetary policy target the Federal Reserve focuses primarily on today is

Economics: Foundations and Models

Trade-Offs,comparative Advantage,and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters