Question 1

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)    
B)    
C)    
D)    
E)  None of these answers is correct. 
A)    
B)    
C)    
D)    
E)  None of these answers is correct.

Question 4

When the Federal Reserve loosens money, the money ________ and interest rates ________.

Accepted Answer

A)  supply curve shifts right; rise 
B)  supply curve shifts right; fall 
C)  demand curve shifts right; rise 
D)  demand curve shifts left; rise 
E)  supply and demand curves do not change; rise 
A)  supply curve shifts right; rise 
B)  supply curve shifts right; fall 
C)  demand curve shifts right; rise 
D)  demand curve shifts left; rise 
E)  supply and demand curves do not change; rise

Question 5

Refer to the following figure when answering the following questions.
Figure 12.3: Yield Curves December 4, 2006 and 2012  
-Consider the yield curves in Figure 12.3. The curve for 12/4/2012 is unusual because:

Accepted Answer

A)  it has no relationship to the real economy. 
B)  its short-term interest rates are lower than long-term interest rates. 
C)  It is not unusual. 
D)  it is lower than the yield curve for 2006. 
E)  it is generally very low. 
A)  it has no relationship to the real economy. 
B)  its short-term interest rates are lower than long-term interest rates. 
C)  It is not unusual. 
D)  it is lower than the yield curve for 2006. 
E)  it is generally very low.

Question 6

Which of the following is the Fisher equation?

Accepted Answer

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

Question 7

The nominal interest rate:

Accepted Answer

A)  is set by Congress. 
B)  is equal to the rate of inflation. 
C)  always is equal to the 10-year bond rate of return. 
D)  is the opportunity cost of holding money. 
E)  is constant. 
A)  is set by Congress. 
B)  is equal to the rate of inflation. 
C)  always is equal to the 10-year bond rate of return. 
D)  is the opportunity cost of holding money. 
E)  is constant.

Question 8

What was unusual about the federal funds rate post-2009?

Accepted Answer

A)  It was over 15 percent. 
B)  It equaled the rate of inflation. 
C)  It was roughly equal to zero. 
D)  It was negative. 
E)  It was exactly equal to the Taylor Rule. 
A)  It was over 15 percent. 
B)  It equaled the rate of inflation. 
C)  It was roughly equal to zero. 
D)  It was negative. 
E)  It was exactly equal to the Taylor Rule.

Question 9

The "jobless recovery" in the aftermath of the 2001 recession was an apparent violation of:

Accepted Answer

A)  Okun's law. 
B)  the Phillips curve. 
C)  the quantity theory. 
D)  the neoclassical model. 
E)  moral hazard. 
A)  Okun's law. 
B)  the Phillips curve. 
C)  the quantity theory. 
D)  the neoclassical model. 
E)  moral hazard.

Question 10

The nominal interest rate is the opportunity cost of holding wealth in money and not savings.

Accepted Answer

A) True 
 B)False

Question 11

In the Phillips curve   is:

Accepted Answer

A)  a demand shock. 
B)  an inflation shock. 
C)  a measure of the sensitivity of inflation to demand conditions. 
D)  a permanent price trend. 
E)  fiscal policy shock. 
A)  a demand shock. 
B)  an inflation shock. 
C)  a measure of the sensitivity of inflation to demand conditions. 
D)  a permanent price trend. 
E)  fiscal policy shock.

Question 12

In the Phillips curve   is a:

Accepted Answer

A)  temporary demand shock. 
B)  permanent price change. 
C)  temporary cost shock. 
D)  temporary unemployment shock. 
E)  structural macroeconomic change. 
A)  temporary demand shock. 
B)  permanent price change. 
C)  temporary cost shock. 
D)  temporary unemployment shock. 
E)  structural macroeconomic change.

Question 13

Normally, yields on short-term Treasury bonds are ________ long-term Treasury bond yields.

Accepted Answer

A)  equal to the fed funds rate minus 
B)  equal to inflation plus 
C)  the same as 
D)  higher than 
E)  lower than 
A)  equal to the fed funds rate minus 
B)  equal to inflation plus 
C)  the same as 
D)  higher than 
E)  lower than

Question 14

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 15

Which of the following contributed to high levels of inflation in the 1970s?
i. A Soviet invasion of Afghanistan
ii. Loose monetary policy
iii. A productivity slowdown

Accepted Answer

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

Question 16

The open-market operations desk is at the New York Fed Bank.

Accepted Answer

A) True 
 B)False

Question 17

Figure 12.17: Real GDP 1993 - 1995  
-Consider Figure 12.17, which contains data for actual real GDP (RGDP) and two different potential RGDP estimates labeled RGDP-A and RGDP-B. Suppose "true" potential RGDP is given by RGDP-A, and the Fed believes potential GDP is given by RGDP-B. Consider the two months marked with A points (point 1 is July 1993 and 2 is April 1994); if you were the Fed chairman during these two points, what type of monetary policy would you conduct? How "accurate" would your policy be?

Accepted Answer

First, for point 1, we see that RGDP-A

Question 18

If the central bank reduces the money supply, the:

Accepted Answer

A)  inflation rate rises and individuals hold more money. 
B)  nominal interest rate rises and individuals hold more money. 
C)  nominal interest rate falls and individuals hold no money. 
D)  nominal interest rate rises and individuals hold less money. 
E)  unemployment rate rises and individuals hold less money. 
A)  inflation rate rises and individuals hold more money. 
B)  nominal interest rate rises and individuals hold more money. 
C)  nominal interest rate falls and individuals hold no money. 
D)  nominal interest rate rises and individuals hold less money. 
E)  unemployment rate rises and individuals hold less money.

Question 19

Which of the following are the "conventional tools" of monetary policy?
i. Term Asset-Backed Securities Loan Facility
ii. Term Auction Facility
iii. Discount rate

Accepted Answer

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

Question 20

Which of the following innovations have become commonplace in financial markets over the past few decades?

Accepted Answer

A)  ATM cards 
B)  credit cards 
C)  money market accounts 
D)  mutual funds 
E)  All of these answers are correct. 
A)  ATM cards 
B)  credit cards 
C)  money market accounts 
D)  mutual funds 
E)  All of these answers are correct.

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

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

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

When the Federal Reserve loosens money, the money and interest rates .

Refer to the following figure when answering the following questions. Figure 12.3: Yield Curves December 4, 2006 and 2012 -Consider the yield curves in Figure 12.3. The curve for 12/4/2012 is unusual because:

Which of the following is the Fisher equation?

The nominal interest rate:

What was unusual about the federal funds rate post-2009?

The "jobless recovery" in the aftermath of the 2001 recession was an apparent violation of:

The nominal interest rate is the opportunity cost of holding wealth in money and not savings.

In the Phillips curve is:

In the Phillips curve is a:

Normally, yields on short-term Treasury bonds are ________ long-term Treasury bond yields.

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

Which of the following contributed to high levels of inflation in the 1970s? i. A Soviet invasion of Afghanistan ii. Loose monetary policy iii. A productivity slowdown

The open-market operations desk is at the New York Fed Bank.

If the central bank reduces the money supply, the:

Which of the following are the "conventional tools" of monetary policy? i. Term Asset-Backed Securities Loan Facility ii. Term Auction Facility iii. Discount rate

Which of the following innovations have become commonplace in financial markets over the past few decades?

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

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 12: Monetary Policy and the Phillips Curve

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

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

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

When the Federal Reserve loosens money, the money ________ and interest rates ________.

Refer to the following figure when answering the following questions. Figure 12.3: Yield Curves December 4, 2006 and 2012 -Consider the yield curves in Figure 12.3. The curve for 12/4/2012 is unusual because:

Which of the following is the Fisher equation?

The nominal interest rate:

What was unusual about the federal funds rate post-2009?

The "jobless recovery" in the aftermath of the 2001 recession was an apparent violation of:

The nominal interest rate is the opportunity cost of holding wealth in money and not savings.

In the Phillips curve is:

In the Phillips curve is a:

Normally, yields on short-term Treasury bonds are ________ long-term Treasury bond yields.

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

Which of the following contributed to high levels of inflation in the 1970s? i. A Soviet invasion of Afghanistan ii. Loose monetary policy iii. A productivity slowdown

The open-market operations desk is at the New York Fed Bank.

If the central bank reduces the money supply, the:

Which of the following are the "conventional tools" of monetary policy? i. Term Asset-Backed Securities Loan Facility ii. Term Auction Facility iii. Discount rate

Which of the following innovations have become commonplace in financial markets over the past few decades?

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

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

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

When the Federal Reserve loosens money, the money and interest rates .