Question 1

Intermediate targets are

Accepted Answer

A) identical to instruments. 
B) macroeconomic variables that the Fed can influence that are related to the Fed's goals. 
C) also known as the Fed's tools. 
D) macroeconomic variables that never get revised. 
A) identical to instruments. 
B) macroeconomic variables that the Fed can influence that are related to the Fed's goals. 
C) also known as the Fed's tools. 
D) macroeconomic variables that never get revised. B

Question 2

High-powered money consists of

Accepted Answer

A) bank reserves plus currency held by the nonbank public. 
B) bank reserves minus vault cash. 
C) all deposits at the Fed. 
D) deposits at the Fed plus vault cash. 
A) bank reserves plus currency held by the nonbank public. 
B) bank reserves minus vault cash. 
C) all deposits at the Fed. 
D) deposits at the Fed plus vault cash. A

Question 3

The degree to which the public believes the central bank's announcements about future policy is its

Accepted Answer

A) reputation. 
B) transparency. 
C) openness. 
D) credibility. 
A) reputation. 
B) transparency. 
C) openness. 
D) credibility. D

Question 4

Suppose there was a banking crisis.The money supply would shrink by the greatest amount if the public ________ their currency-deposit ratio and the banks ________ their reserve-deposit ratio.

Accepted Answer

A) decreased; decreased 
B) decreased; increased 
C) increased; decreased 
D) increased; increased 
A) decreased; decreased 
B) decreased; increased 
C) increased; decreased 
D) increased; increased

Question 5

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts down and to the left,and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run,what should the Fed do? Use the LR curve to formulate your answer.

Accepted Answer

Reduce the real inte

Question 6

Banks in good condition may take out a ________ from the Fed.

Accepted Answer

A) secondary credit discount rate 
B) Fed funds loan 
C) primary credit discount rate 
D) class A loan 
A) secondary credit discount rate 
B) Fed funds loan 
C) primary credit discount rate 
D) class A loan

Question 7

In the Keynesian model,suppose the Fed wants to keep output unchanged.If the IS curve shifts to the left,and the Fed acts to keep output unchanged,then

Accepted Answer

A) taxes will increase. 
B) the money supply will decline. 
C) the real interest rate will decrease. 
D) taxes will decrease. 
A) taxes will increase. 
B) the money supply will decline. 
C) the real interest rate will decrease. 
D) taxes will decrease.

Question 8

Zero lower bound refers to the fact that

Accepted Answer

A) the government budget deficit must be zero in the long run. 
B) the lowest possible level of the current account deficit is zero in the long run. 
C) the inflation rate can never decline below zero. 
D) nominal interest rates cannot fall below zero. 
A) the government budget deficit must be zero in the long run. 
B) the lowest possible level of the current account deficit is zero in the long run. 
C) the inflation rate can never decline below zero. 
D) nominal interest rates cannot fall below zero.

Question 9

If a bank borrows from a Federal Reserve Bank,the interest rate is called

Accepted Answer

A) the prime rate. 
B) the discount rate. 
C) the Fed funds rate. 
D) the reserve availability rate. 
A) the prime rate. 
B) the discount rate. 
C) the Fed funds rate. 
D) the reserve availability rate.

Question 10

The Federal Reserve is

Accepted Answer

A) a Kentucky bourbon. 
B) a wild game preserve. 
C) an express mail service. 
D) the central bank of the United States. 
A) a Kentucky bourbon. 
B) a wild game preserve. 
C) an express mail service. 
D) the central bank of the United States.

Question 11

The new monetary policy tool that the Fed began using in 2008 is

Accepted Answer

A) changing the interest rate paid on reserves. 
B) imposing a surcharge on credit cards. 
C) putting a tax on all financial transactions. 
D) borrowing from China. 
A) changing the interest rate paid on reserves. 
B) imposing a surcharge on credit cards. 
C) putting a tax on all financial transactions. 
D) borrowing from China.

Question 12

From 2007 to 2012,the amount of assets owned by the Fed approximately

Accepted Answer

A) doubled. 
B) tripled. 
C) quadrupled. 
D) quintupled. 
A) doubled. 
B) tripled. 
C) quadrupled. 
D) quintupled.

Question 13

The leadership of the Federal Reserve System is provided by

Accepted Answer

A) the Board of Governors. 
B) the Federal Advisory Committee. 
C) the Federal Open Market Committee. 
D) the directors of the twelve Federal Reserve banks. 
A) the Board of Governors. 
B) the Federal Advisory Committee. 
C) the Federal Open Market Committee. 
D) the directors of the twelve Federal Reserve banks.

Question 14

Suppose that in Mysore,the reserve-deposit ratio is
Res = 0.5 - 2 i,
Where i is the nominal interest rate.The currency-deposit ratio is 0.2 and the monetary base equals 100.The real quantity of money demanded is given by the money demand function
L(Y,i)= 0.5Y - 10i,
Where Y is real output.Currently,the real interest rate is 5% and the economy expects an inflation rate of 5%.The money multiplier equals

Accepted Answer

A) 2)00. 
B) 2)40. 
C) 3)00. 
D) 4)00. 
A) 2)00. 
B) 2)40. 
C) 3)00. 
D) 4)00.

Question 15

The basic Keynesian argument for discretionary monetary policy is that

Accepted Answer

A) monetary policy is the principal cause of business cycles. 
B) monetary policy is much more effective than fiscal policy. 
C) aggregate demand is unstable and monetary policy can help to stabilize it. 
D) reducing unemployment is much more important than reducing inflation. 
A) monetary policy is the principal cause of business cycles. 
B) monetary policy is much more effective than fiscal policy. 
C) aggregate demand is unstable and monetary policy can help to stabilize it. 
D) reducing unemployment is much more important than reducing inflation.

Question 16

A bank run is

Accepted Answer

A) a large-scale,panicky withdrawal of deposits from a bank. 
B) the transfer of funds from one bank to another. 
C) a situation when a bank borrows from the Fed's discount window. 
D) a situation in which a bank borrows at the Federal funds rate. 
A) a large-scale,panicky withdrawal of deposits from a bank. 
B) the transfer of funds from one bank to another. 
C) a situation when a bank borrows from the Fed's discount window. 
D) a situation in which a bank borrows at the Federal funds rate.

Question 17

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts to the left,and the Fed wants to keep output unchanged,

Accepted Answer

A) taxes will increase. 
B) the money supply will decline. 
C) the real interest rate will decrease. 
D) taxes will decrease. 
A) taxes will increase. 
B) the money supply will decline. 
C) the real interest rate will decrease. 
D) taxes will decrease.

Question 18

Describe the Taylor rule.If the Fed were following the rule,what would the nominal Fed funds rate be if inflation over the past year were 4% and output were 1% below its full-employment level?

Accepted Answer

The Taylor rule is a rule for monetary p

Question 19

Assume that the currency-deposit ratio is 0.3 and the reserve-deposit ratio is 0.2.What is the money multiplier?

Accepted Answer

A) 1)5 
B) 2)0 
C) 2)6 
D) 5)0 
A) 1)5 
B) 2)0 
C) 2)6 
D) 5)0

Question 20

What types of rules for monetary policy may be sensible for policymakers to consider? What is the advantage of using rules over discretion? What problems might there be with rules?

Accepted Answer

One possible rule is a constant money gr

Intermediate targets are

High-powered money consists of

The degree to which the public believes the central bank's announcements about future policy is its

Suppose there was a banking crisis.The money supply would shrink by the greatest amount if the public their currency-deposit ratio and the banks their reserve-deposit ratio.

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts down and to the left,and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run,what should the Fed do? Use the LR curve to formulate your answer.

Banks in good condition may take out a ________ from the Fed.

In the Keynesian model,suppose the Fed wants to keep output unchanged.If the IS curve shifts to the left,and the Fed acts to keep output unchanged,then

Zero lower bound refers to the fact that

If a bank borrows from a Federal Reserve Bank,the interest rate is called

The Federal Reserve is

The new monetary policy tool that the Fed began using in 2008 is

From 2007 to 2012,the amount of assets owned by the Fed approximately

The leadership of the Federal Reserve System is provided by

The basic Keynesian argument for discretionary monetary policy is that

A bank run is

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts to the left,and the Fed wants to keep output unchanged,

Describe the Taylor rule.If the Fed were following the rule,what would the nominal Fed funds rate be if inflation over the past year were 4% and output were 1% below its full-employment level?

Assume that the currency-deposit ratio is 0.3 and the reserve-deposit ratio is 0.2.What is the money multiplier?

What types of rules for monetary policy may be sensible for policymakers to consider? What is the advantage of using rules over discretion? What problems might there be with rules?

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Government Spending and Its Financing

Filters

Exam 14: Monetary Policy and the Federal Reserve System

Intermediate targets are

High-powered money consists of

The degree to which the public believes the central bank's announcements about future policy is its

Suppose there was a banking crisis.The money supply would shrink by the greatest amount if the public ________ their currency-deposit ratio and the banks ________ their reserve-deposit ratio.

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts down and to the left,and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run,what should the Fed do? Use the LR curve to formulate your answer.

Banks in good condition may take out a ________ from the Fed.

In the Keynesian model,suppose the Fed wants to keep output unchanged.If the IS curve shifts to the left,and the Fed acts to keep output unchanged,then

Zero lower bound refers to the fact that

If a bank borrows from a Federal Reserve Bank,the interest rate is called

The Federal Reserve is

The new monetary policy tool that the Fed began using in 2008 is

From 2007 to 2012,the amount of assets owned by the Fed approximately

The leadership of the Federal Reserve System is provided by

The basic Keynesian argument for discretionary monetary policy is that

A bank run is

In the Keynesian model,suppose the Fed sets a target for the real interest rate.If the IS curve shifts to the left,and the Fed wants to keep output unchanged,

Describe the Taylor rule.If the Fed were following the rule,what would the nominal Fed funds rate be if inflation over the past year were 4% and output were 1% below its full-employment level?

Assume that the currency-deposit ratio is 0.3 and the reserve-deposit ratio is 0.2.What is the money multiplier?

What types of rules for monetary policy may be sensible for policymakers to consider? What is the advantage of using rules over discretion? What problems might there be with rules?

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Government Spending and Its Financing

Filters

Suppose there was a banking crisis.The money supply would shrink by the greatest amount if the public their currency-deposit ratio and the banks their reserve-deposit ratio.