Question 1

-Starting at any equilibrium in Figure 12.11,if individuals want to hold more wealth in savings,the money market would move from:

Accepted Answer

A) point B to A. 
B) point B to C. 
C) point B to D. 
D) point A to C. 
E) Not enough information is given. 
A) point B to A. 
B) point B to C. 
C) point B to D. 
D) point A to C. 
E) Not enough information is given.

Question 2

The money demand curve slopes upward with respect to the nominal interest rate.

Accepted Answer

A) True 
 B)False

Question 3

-Consider Figure 12.7.You are chairman of the Federal Reserve in 1995.You believe potential output follows the dotted line after 1993,but in actuality,it follows the line denoted "True potential output." The current state of the economy is given by the curve "Actual output." Given the information in the figure,you __________,because you believe the economy is in a __________;but your advice instead __________.

Accepted Answer

A) lower interest rates;recession;accelerates inflation 
B) raise interest rates;boom;accelerates a recession 
C) keep interest rates the same;boom;accelerates inflation 
D) lower interest rates;boom;increases unemployment 
E) Not enough information is given. 
A) lower interest rates;recession;accelerates inflation 
B) raise interest rates;boom;accelerates a recession 
C) keep interest rates the same;boom;accelerates inflation 
D) lower interest rates;boom;increases unemployment 
E) Not enough information is given.

Question 4

What is the main policy tool available to the Federal Reserve?

Accepted Answer

A) reserve rate 
B) discount rate 
C) federal funds rate 
D) printing money 
E) mortgage rate 
A) reserve rate 
B) discount rate 
C) federal funds rate 
D) printing money 
E) mortgage rate

Question 5

Which of the following scenarios best describes the short-run model?

Accepted Answer

A)    
B)    
C)    
D)    
E) None of the above is correct. 
A)    
B)    
C)    
D)    
E) None of the above is correct.

Question 6

-In Figure 12.1,if the Federal Reserve sets the real interest rate at  
,which line represents the MP curve?

Accepted Answer

A)    
B)    
C)    
D)    
E) Not enough information is given. 
A)    
B)    
C)    
D)    
E) Not enough information is given.

Question 7

The real interest rate is given by Real interest rate = Nominal interest rate + Inflation.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is not true?

Accepted Answer

A) Many agents suffer from money illusion. 
B) Small menu prices lead to price stickiness. 
C) Under adaptive expectations,prices are perfectly flexible. 
D) In the classical dichotomy,all prices are flexible. 
E) Imperfect competition may lead to price inflexibility. 
A) Many agents suffer from money illusion. 
B) Small menu prices lead to price stickiness. 
C) Under adaptive expectations,prices are perfectly flexible. 
D) In the classical dichotomy,all prices are flexible. 
E) Imperfect competition may lead to price inflexibility.

Question 9

-Consider Figure 12.9,which shows short-run output fluctuations  
From 1990.1 to 2000.4,by quarter.If this is all the information you have,during the period 1997.1-1999.4,from the Phillips curve,you would conclude that:

Accepted Answer

A) inflation is accelerating,   . 
B) inflation is decelerating,   . 
C) unemployment is falling. 
D) unemployment is rising. 
E) Not enough information is given. 
A) inflation is accelerating,   . 
B) inflation is decelerating,   . 
C) unemployment is falling. 
D) unemployment is rising. 
E) Not enough information is given.

Question 10

When the Fed targets the federal funds rate,it uses the reserve rate to change the money supply.

Accepted Answer

A) True 
 B)False

Question 11

An increase in interest rate by the Federal Reserve will affect only real interest rates because:

Accepted Answer

A) inflation is sticky in the short run. 
B) the relationship between money growth and inflation does not necessarily hold in the short run. 
C) prices are flexible in the short and long runs. 
D) contracts apply only in the very short run. 
E) a and b are correct. 
A) inflation is sticky in the short run. 
B) the relationship between money growth and inflation does not necessarily hold in the short run. 
C) prices are flexible in the short and long runs. 
D) contracts apply only in the very short run. 
E) a and b are correct.

Question 12

-Consider Figure 12.8,which shows the change in inflation  
From 1995.1 to 2000.4,by quarter.You are Federal Reserve chairman Greenspan and today's date is the second quarter of 1997 (1997.2).Given the information you have,using the Phillips curve,to stabilize the economy you would __________,risking __________.

Accepted Answer

A) raise interest rates;inflation 
B) lower interest rates;inflation 
C) raise interest rates;recession 
D) lower interest rates;higher unemployment 
E) Not enough information is given. 
A) raise interest rates;inflation 
B) lower interest rates;inflation 
C) raise interest rates;recession 
D) lower interest rates;higher unemployment 
E) Not enough information is given.

Question 13

When the Fed targets the interest rate,it adjusts the money supply to maintain that interest-rate target.

Accepted Answer

A) True 
 B)False

Question 14

-Start from any equilibrium in Figure 12.5 to answer the following question.In 1980,U.S.inflation hit about 14 percent;Federal Reserve chairman __________ engineered a decline in inflation by __________,shown in the figure as movement from __________.

Accepted Answer

A) Volcker;raising inflation rates;b to c 
B) Bernanke;raising interest rates;b to d 
C) Volcker;lowering interest rates;c to b 
D) Volcker;raising interest rates;b to c 
E) Greenspan;lowering interest rates;a to b 
A) Volcker;raising inflation rates;b to c 
B) Bernanke;raising interest rates;b to d 
C) Volcker;lowering interest rates;c to b 
D) Volcker;raising interest rates;b to c 
E) Greenspan;lowering interest rates;a to b

Question 15

The main tool used by the Federal Reserve is the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 16

In the classical dichotomy,some prices are sticky.

Accepted Answer

A) True 
 B)False

Question 17

Discuss the differences between the ex ante and ex post real interest rate.

Accepted Answer

The ex ante,which is based on the Fisher

Question 18

Which of the following is(are)the mission of the Federal Reserve Bank?
i.Preserve price stability.
ii.Foster stable fiscal policy.
iii.Ensure taxes are fair.

Accepted Answer

A) ii only. 
B) i only. 
C) iii only. 
D) i and ii. 
E) i and iii. 
A) ii only. 
B) i only. 
C) iii only. 
D) i and ii. 
E) i and iii.

Question 19

Once a __________ is chosen,the main tool the Federal Reserve uses to change the money supply is __________.

Accepted Answer

A) federal funds rate;open market operations 
B) federal funds rate;changing the discount rate 
C) tax rate;changing the exchange rate 
D) number of dollars in circulation;changing the reserve rate 
E) discount rate;borrowing money from the federal government 
A) federal funds rate;open market operations 
B) federal funds rate;changing the discount rate 
C) tax rate;changing the exchange rate 
D) number of dollars in circulation;changing the reserve rate 
E) discount rate;borrowing money from the federal government

Question 20

When a central bank targets the money supply,it adopts a policy to adjust __________ to accommodate __________.

Accepted Answer

A) interest rates;tax changes 
B) interest rates;money demand shocks 
C) money demand;government debt 
D) interest rates;money supply 
E) money demand;money supply shocks 
A) interest rates;tax changes 
B) interest rates;money demand shocks 
C) money demand;government debt 
D) interest rates;money supply 
E) money demand;money supply shocks

-Starting at any equilibrium in Figure 12.11,if individuals want to hold more wealth in savings,the money market would move from:

The money demand curve slopes upward with respect to the nominal interest rate.

What is the main policy tool available to the Federal Reserve?

Which of the following scenarios best describes the short-run model?

-In Figure 12.1,if the Federal Reserve sets the real interest rate at ,which line represents the MP curve?

The real interest rate is given by Real interest rate = Nominal interest rate + Inflation.

Which of the following statements is not true?

-Consider Figure 12.9,which shows short-run output fluctuations From 1990.1 to 2000.4,by quarter.If this is all the information you have,during the period 1997.1-1999.4,from the Phillips curve,you would conclude that:

When the Fed targets the federal funds rate,it uses the reserve rate to change the money supply.

An increase in interest rate by the Federal Reserve will affect only real interest rates because:

-Consider Figure 12.8,which shows the change in inflation From 1995.1 to 2000.4,by quarter.You are Federal Reserve chairman Greenspan and today's date is the second quarter of 1997 (1997.2).Given the information you have,using the Phillips curve,to stabilize the economy you would ,risking .

When the Fed targets the interest rate,it adjusts the money supply to maintain that interest-rate target.

-Start from any equilibrium in Figure 12.5 to answer the following question.In 1980,U.S.inflation hit about 14 percent;Federal Reserve chairman engineered a decline in inflation by ,shown in the figure as movement from __.

The main tool used by the Federal Reserve is the federal funds rate.

In the classical dichotomy,some prices are sticky.

Discuss the differences between the ex ante and ex post real interest rate.

Which of the following is(are)the mission of the Federal Reserve Bank? i.Preserve price stability. ii.Foster stable fiscal policy. iii.Ensure taxes are fair.

Once a is chosen,the main tool the Federal Reserve uses to change the money supply is .

When a central bank targets the money supply,it adopts a policy to adjust to accommodate .

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 12: Monetary Policy and the Phillips Curve

-Starting at any equilibrium in Figure 12.11,if individuals want to hold more wealth in savings,the money market would move from:

The money demand curve slopes upward with respect to the nominal interest rate.

What is the main policy tool available to the Federal Reserve?

Which of the following scenarios best describes the short-run model?

-In Figure 12.1,if the Federal Reserve sets the real interest rate at ,which line represents the MP curve?

The real interest rate is given by Real interest rate = Nominal interest rate + Inflation.

Which of the following statements is not true?

-Consider Figure 12.9,which shows short-run output fluctuations From 1990.1 to 2000.4,by quarter.If this is all the information you have,during the period 1997.1-1999.4,from the Phillips curve,you would conclude that:

When the Fed targets the federal funds rate,it uses the reserve rate to change the money supply.

An increase in interest rate by the Federal Reserve will affect only real interest rates because:

When the Fed targets the interest rate,it adjusts the money supply to maintain that interest-rate target.

-Start from any equilibrium in Figure 12.5 to answer the following question.In 1980,U.S.inflation hit about 14 percent;Federal Reserve chairman __________ engineered a decline in inflation by __________,shown in the figure as movement from __________.

The main tool used by the Federal Reserve is the federal funds rate.

In the classical dichotomy,some prices are sticky.

Discuss the differences between the ex ante and ex post real interest rate.

Which of the following is(are)the mission of the Federal Reserve Bank? i.Preserve price stability. ii.Foster stable fiscal policy. iii.Ensure taxes are fair.

Once a __________ is chosen,the main tool the Federal Reserve uses to change the money supply is __________.

When a central bank targets the money supply,it adopts a policy to adjust __________ to accommodate __________.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

-Start from any equilibrium in Figure 12.5 to answer the following question.In 1980,U.S.inflation hit about 14 percent;Federal Reserve chairman engineered a decline in inflation by ,shown in the figure as movement from __.

Once a is chosen,the main tool the Federal Reserve uses to change the money supply is .

When a central bank targets the money supply,it adopts a policy to adjust to accommodate .