Question 1

When the Fed buys assets other than short-term government bonds it is called:

Accepted Answer

A)  the inflation tax. 
B)  fiscal policy. 
C)  term auction credit. 
D)  quantitative easing. 
E)  seignorage. 
A)  the inflation tax. 
B)  fiscal policy. 
C)  term auction credit. 
D)  quantitative easing. 
E)  seignorage.

Question 2

The high growth rates of money in the late 2000s was likely due to:

Accepted Answer

A)  the Fed's concern about deflation. 
B)  the rise in the overall price level. 
C)  a rise in inflation expectations. 
D)  the appointment of a new Fed chairman. 
E)  prodding from the Bush and Obama administrations. 
A)  the Fed's concern about deflation. 
B)  the rise in the overall price level. 
C)  a rise in inflation expectations. 
D)  the appointment of a new Fed chairman. 
E)  prodding from the Bush and Obama administrations.

Question 3

Figure 14.1: BAA and 10-Year Bonds, 2006-2010   
-Consider Figure 14.1. What event likely caused the financial friction to jump to about 6 percent?

Accepted Answer

A)  the financial crisis in September 2008 
B)  growing unrest in the Middle East 
C)  the Greek financial crisis 
D)  the growing trade deficit with China 
E)  Not enough information is given. 
A)  the financial crisis in September 2008 
B)  growing unrest in the Middle East 
C)  the Greek financial crisis 
D)  the growing trade deficit with China 
E)  Not enough information is given.

Question 4

Refer to the following figure when answering the following questions.
Figure 14.2: IS-MP Curve  
-Consider Figure 14.2. Starting from the long-run equilibrium, the burst of the housing bubble and the appropriate Fed response, WITHOUT a financial friction, can be shown as a movement from point ________ to point ________, and the economy is in ________.

Accepted Answer

A)  c; e; its long-run equilibrium 
B)  d; b; its long-run equilibrium 
C)  b; a; an expansion 
D)  a; d; a recession 
E)  a; d; an expansion 
A)  c; e; its long-run equilibrium 
B)  d; b; its long-run equilibrium 
C)  b; a; an expansion 
D)  a; d; a recession 
E)  a; d; an expansion

Question 5

The Squam Lake Group's reform suggestions included enhancing bank capital requirements and tying executive bonuses to long-term bank performance.

Accepted Answer

A) True 
 B)False

Question 6

P/E ratio stands for ________ ratio.

Accepted Answer

A)  price-earnings 
B)  price-expenditure 
C)  stock index-GDP 
D)  home price-easing 
E)  physical education 
A)  price-earnings 
B)  price-expenditure 
C)  stock index-GDP 
D)  home price-easing 
E)  physical education

Question 7

Consider Figure 14.7 below. Discuss the relationship between these two series, with particular attention to the Fisher equation.Figure 14.7: U.S. 10-Year Bond Yield and Inflation 2006-2010

Accepted Answer

The Fisher equation is the relationship

Question 8

The burst of the housing bubble can be represented in the IS/MP model as a(n):

Accepted Answer

A)  decline in   . 
B)  rise in   . 
C)  decline in inflation. 
D)  increase in   . 
E)  rise in   . 
A)  decline in   . 
B)  rise in   . 
C)  decline in inflation. 
D)  increase in   . 
E)  rise in   .

Question 9

The Fed's balance sheet normally consists of:

Accepted Answer

A)  reserves and term auction credit. 
B)  central bank liquidity swaps. 
C)  reserves and short-term bonds. 
D)  long-term bonds and mortgage-backed securities. 
E)  mortgages and cash. 
A)  reserves and term auction credit. 
B)  central bank liquidity swaps. 
C)  reserves and short-term bonds. 
D)  long-term bonds and mortgage-backed securities. 
E)  mortgages and cash.

Question 10

The effect of the subprime loan crisis pushed the ________. This pushed the MP curve ________ and the AD ________.

Accepted Answer

A)  financial friction up; up; down 
B)  inflation rate up; up; down 
C)  unemployment rate down; down; up 
D)  risk-free interest rate up; down; up 
E)  federal funds rate to zero; down; down 
A)  financial friction up; up; down 
B)  inflation rate up; up; down 
C)  unemployment rate down; down; up 
D)  risk-free interest rate up; down; up 
E)  federal funds rate to zero; down; down

Question 11

The event that likely caused the financial friction to jump to about 6 percent in September 2008 was the growing unrest in Syria.

Accepted Answer

A) True 
 B)False

Question 12

Figure 14.1: BAA and 10-Year Bonds, 2006-2010   
-In Figure 14.1 above, the 10-year bond yield is considered ________, while the BAA bond yield represents ________.

Accepted Answer

A)  the federal funds rate; the financial friction 
B)  the saving rate; the lending rate 
C)  the financial friction; the prime lending rate 
D)  a risk-free interest rate; a relatively risky interest rate 
E)  inflation; the M1 money growth rate 
A)  the federal funds rate; the financial friction 
B)  the saving rate; the lending rate 
C)  the financial friction; the prime lending rate 
D)  a risk-free interest rate; a relatively risky interest rate 
E)  inflation; the M1 money growth rate

Question 13

The relatively high growth rate of money in the late 2000s is likely due to the Fed's fear of low unemployment.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following financial reforms were suggested by the Squam Lake Group?

Accepted Answer

A)  allow banks to choose the amount of risk 
B)  allow a bank to choose its own regulator 
C)  enhance capital requirements 
D)  allow bonuses to be paid out for only short-term investments 
E)  increase leverage ratios 
A)  allow banks to choose the amount of risk 
B)  allow a bank to choose its own regulator 
C)  enhance capital requirements 
D)  allow bonuses to be paid out for only short-term investments 
E)  increase leverage ratios

Question 15

The Taylor rule predicted the federal funds rate (in the text) was derived from which of the following equations?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 16

When an economy is in a deflationary spiral, and nominal interest rates are close to zero, it may be necessary:

Accepted Answer

A)  for the Fed to print money. 
B)  for the Fed to buy financial securities. 
C)  to use fiscal stimulus. 
D)  All of these answers are correct. 
E)  None of these answers is correct. 
A)  for the Fed to print money. 
B)  for the Fed to buy financial securities. 
C)  to use fiscal stimulus. 
D)  All of these answers are correct. 
E)  None of these answers is correct.

Question 17

In the aftermath of the recent financial crisis, the Fed's assets on its balance sheet grew to include which of the following?

Accepted Answer

A)  term auction credit 
B)  mortgage-backed securities 
C)  bank reserves 
D)  liabilities 
E)  Treasury accounts 
A)  term auction credit 
B)  mortgage-backed securities 
C)  bank reserves 
D)  liabilities 
E)  Treasury accounts

Question 18

The financial friction is the:

Accepted Answer

A)  difference between the federal funds rate and interest rates in financial markets. 
B)  interest rate used in subprime loans. 
C)  difference between long-run inflation and the actual rate of inflation. 
D)  result of adding the inflation rate to the unemployment rate. 
E)  variance of the risk-free interest rate. 
A)  difference between the federal funds rate and interest rates in financial markets. 
B)  interest rate used in subprime loans. 
C)  difference between long-run inflation and the actual rate of inflation. 
D)  result of adding the inflation rate to the unemployment rate. 
E)  variance of the risk-free interest rate.

Question 19

When a financial friction is added to the MP curve we have:

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
E)    . 
A)    . 
B)    . 
C)    . 
D)    . 
E)    .

Question 20

Prior to the recent financial crisis, the bulk of the Fed's assets on its balance sheet were ________ and its liabilities were ________.

Accepted Answer

A)  U.S. Treasury bills; currency 
B)  loans; Treasury accounts 
C)  reserves; vault cash 
D)  stocks; foreign currency 
E)  currency; reserves 
A)  U.S. Treasury bills; currency 
B)  loans; Treasury accounts 
C)  reserves; vault cash 
D)  stocks; foreign currency 
E)  currency; reserves

When the Fed buys assets other than short-term government bonds it is called:

The high growth rates of money in the late 2000s was likely due to:

Figure 14.1: BAA and 10-Year Bonds, 2006-2010 -Consider Figure 14.1. What event likely caused the financial friction to jump to about 6 percent?

The Squam Lake Group's reform suggestions included enhancing bank capital requirements and tying executive bonuses to long-term bank performance.

P/E ratio stands for ________ ratio.

Consider Figure 14.7 below. Discuss the relationship between these two series, with particular attention to the Fisher equation.Figure 14.7: U.S. 10-Year Bond Yield and Inflation 2006-2010

The burst of the housing bubble can be represented in the IS/MP model as a(n):

The Fed's balance sheet normally consists of:

The effect of the subprime loan crisis pushed the . This pushed the MP curve and the AD .

The event that likely caused the financial friction to jump to about 6 percent in September 2008 was the growing unrest in Syria.

Figure 14.1: BAA and 10-Year Bonds, 2006-2010 -In Figure 14.1 above, the 10-year bond yield is considered , while the BAA bond yield represents .

The relatively high growth rate of money in the late 2000s is likely due to the Fed's fear of low unemployment.

Which of the following financial reforms were suggested by the Squam Lake Group?

The Taylor rule predicted the federal funds rate (in the text) was derived from which of the following equations?

When an economy is in a deflationary spiral, and nominal interest rates are close to zero, it may be necessary:

In the aftermath of the recent financial crisis, the Fed's assets on its balance sheet grew to include which of the following?

The financial friction is the:

When a financial friction is added to the MP curve we have:

Prior to the recent financial crisis, the bulk of the Fed's assets on its balance sheet were and its liabilities were .

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

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 14: The Great Recession and the Short-Run Model

When the Fed buys assets other than short-term government bonds it is called:

The high growth rates of money in the late 2000s was likely due to:

Figure 14.1: BAA and 10-Year Bonds, 2006-2010 -Consider Figure 14.1. What event likely caused the financial friction to jump to about 6 percent?

The Squam Lake Group's reform suggestions included enhancing bank capital requirements and tying executive bonuses to long-term bank performance.

P/E ratio stands for ________ ratio.

Consider Figure 14.7 below. Discuss the relationship between these two series, with particular attention to the Fisher equation.Figure 14.7: U.S. 10-Year Bond Yield and Inflation 2006-2010

The burst of the housing bubble can be represented in the IS/MP model as a(n):

The Fed's balance sheet normally consists of:

The effect of the subprime loan crisis pushed the ________. This pushed the MP curve ________ and the AD ________.

The event that likely caused the financial friction to jump to about 6 percent in September 2008 was the growing unrest in Syria.

Figure 14.1: BAA and 10-Year Bonds, 2006-2010 -In Figure 14.1 above, the 10-year bond yield is considered ________, while the BAA bond yield represents ________.

The relatively high growth rate of money in the late 2000s is likely due to the Fed's fear of low unemployment.

Which of the following financial reforms were suggested by the Squam Lake Group?

The Taylor rule predicted the federal funds rate (in the text) was derived from which of the following equations?

When an economy is in a deflationary spiral, and nominal interest rates are close to zero, it may be necessary:

In the aftermath of the recent financial crisis, the Fed's assets on its balance sheet grew to include which of the following?

The financial friction is the:

When a financial friction is added to the MP curve we have:

Prior to the recent financial crisis, the bulk of the Fed's assets on its balance sheet were ________ and its liabilities were ________.

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

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

The effect of the subprime loan crisis pushed the . This pushed the MP curve and the AD .

Figure 14.1: BAA and 10-Year Bonds, 2006-2010 -In Figure 14.1 above, the 10-year bond yield is considered , while the BAA bond yield represents .

Prior to the recent financial crisis, the bulk of the Fed's assets on its balance sheet were and its liabilities were .