Question 1

When the Fed increases the money supply by buying Treasury securities,it will

Accepted Answer

A)  decrease short-term interest rates to a greater degree than long-term interest rates.
B)  decrease long-term interest rates to a greater degree than short-term interest rates.
C)  increase short-term interest rates to a greater degree than long-term interest rates.
D)  increase long-term interest rates to a greater degree than short-term interest rates.

Question 2

An unexpected increase in the supply of money will

Accepted Answer

A)  reduce the real rate of interest and,thereby,trigger an increase in current spending by households and businesses.
B)  reduce aggregate demand and real output in the short run.
C)  increase only the general level of prices in the short run.
D)  lead to a higher rate of unemployment in the short run.

Question 3

If expansionary monetary policy reduces real interest rates in the United States,which of the following is most likely to occur?

Accepted Answer

A)  Net foreign investment will decline,causing the dollar to depreciate and net exports to increase.
B)  Net foreign investment will decline,causing the dollar to appreciate and net exports to decrease.
C)  Net foreign investment will increase,causing the dollar to appreciate and net exports to decline.
D)  Net foreign investment will increase,causing the dollar to depreciate and net exports to increase.

Question 4

Which of the following best describes the relationship between the velocity of money and the demand for money?

Accepted Answer

A)  The demand for money is not related to the velocity of money.
B)  When the demand for money increases,the velocity of money increases.
C)  The demand for money must be stable for the velocity of money to increase.
D)  When the demand for money declines,the velocity of money increases.

Question 5

A shift to a more expansionary monetary policy will generally _________ in the short run,but if the rapid monetary expansion persists,the long-run result will be ______.(fill in the blanks. )

Accepted Answer

A)  expand output and employment;inflation
B)  increase the general level of prices;expand output and employment
C)  increase the rate of unemployment;reduce the rate of inflation
D)  reduce the rate of inflation;increase the rate of unemployment

Question 6

The pre-1930 classical economists thought the primary effect of an increase in the money supply would be

Accepted Answer

A)  an increase in real GDP.
B)  a reduction in velocity.
C)  a decrease in unemployment.
D)  a proportional increase in prices.

Question 7

If the actual federal funds rate is 1 percent,when the target rate called for by the Taylor rule is 5 percent,this indicates that

Accepted Answer

A)  monetary policy is overly expansionary and a shift toward a more restrictive policy would be appropriate.
B)  monetary policy is too restrictive and a shift to a more expansionary policy would be appropriate.
C)  monetary policy is unable to influence interest rates.
D)  current monetary policy is on target and no policy shift is needed.

Question 8

Use the figure below to answer the following question(s) .
Figure 14-5
 
-In Figure 14-5,AD₁ and SRAS₁ indicate an economy initially operating at full-employment output level,Y₁.The long-run impact of the Fed unexpectedly shifting to a more restrictive monetary policy will be

Accepted Answer

A)  a decrease in aggregate demand to AD₂ and a decrease in real output to Y₂.
B)  a decrease in the full-employment level of output to Y₂.
C)  a decrease in aggregate demand to AD₂ and an increase in short-run aggregate supply to SRAS₂,causing the price level to fall to P₃ and real output to remain unchanged at Y₁.
D)  no change;AD and SRAS will stay at AD₁ and SRAS₁.

Question 9

Which of the following interest rates will be most affected by a shift to a more restrictive monetary policy?

Accepted Answer

A)  rate on a 30-year home mortgage
B)  rate on a 20-year Treasury bond
C)  rate on a 10-year bank loan
D)  rate on a three-month certificate of deposit

Question 10

If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment,which of the following would be most appropriate?

Accepted Answer

A)  a larger budget deficit and the purchase of securities in the open market
B)  a government surplus and the sale of securities in the open market
C)  a larger government deficit and an increase in the discount rate
D)  a government surplus and a reduction in the discount rate

Question 11

Which of the following interest rates will be least affected by a shift in monetary policy that alters the money supply?

Accepted Answer

A)  a three-month certificate of deposit
B)  interest on checking accounts
C)  a one-year bank loan
D)  a thirty-year home mortgage

Question 12

When the Fed purchases additional securities and shifts to a more expansionary monetary policy,

Accepted Answer

A)  the inflation rate will rise almost immediately.
B)  the growth of output and employment will increase quickly.
C)  several months will typically pass before the shift in policy exerts much impact on output and employment.
D)  this policy will eventually lead to a decline in the general level of prices if it is continued for a prolonged period of time.

Question 13

In the short run,an unanticipated shift to a more restrictive monetary policy is most likely to result in

Accepted Answer

A)  a decrease in short-term interest rates.
B)  a reduction in the growth rate of real GDP.
C)  an increase in the rate of inflation.
D)  an increase in employment.

Question 14

When the Fed unexpectedly increases the money supply,

Accepted Answer

A)  real interest rates will rise and the foreign exchange value of the dollar will appreciate.
B)  real interest rates will rise and the foreign exchange value of the dollar will depreciate.
C)  real interest rates will fall and the foreign exchange value of the dollar will appreciate.
D)  real interest rates will fall and the foreign exchange value of the dollar will depreciate.

Question 15

Which of the following contributed to the financial crisis of 2008?

Accepted Answer

A)  the housing price boom (2002-2005) ,followed by a housing price bust (2007-2008) 
B)  a sharp reduction in stock prices in 2008
C)  a sharp increase in the price of crude oil from January 2007 to mid-year 2008
D)  all of the above

Question 16

If the monetary authorities persistently expand the money supply at a rapid rate,the probable result will be

Accepted Answer

A)  inflation.
B)  high nominal interest rates.
C)  rapid growth of real GDP.
D)  both a and b.

Question 17

Discuss the following views concerning the impact of monetary policy:
a.classicals
b.Keynesians
c.monetarists
d."modern view"

Accepted Answer

a.The classicals believe in the quantity...

Question 18

In the short run,an unanticipated shift to a more expansionary monetary policy is most likely to result in

Accepted Answer

A)  an increase in short-term interest rates.
B)  a reduction in aggregate demand.
C)  a reduction in the inflation rate.
D)  an increase in employment.

Question 19

Which of the following will increase interest rates in the short run?

Accepted Answer

A)  an decrease in reserve requirements
B)  the sale of bonds by the Federal Reserve in the open market
C)  a decrease in real GDP
D)  an decrease in the price level

Question 20

If the Fed unexpectedly decreases the money supply,real GDP

Accepted Answer

A)  increases because the resulting increase in the interest rate leads to a decrease in investment.
B)  increases because the resulting decrease in the interest rate leads to an increase in investment.
C)  decreases because the resulting increase in the interest rate leads to a decrease in investment.
D)  decreases because the resulting increase in the interest rate leads to an increase in investment.
E)  decreases because the resulting decrease in the interest rate leads to an increase in investment.

Exam 14: Modern Macroeconomics and Monetary Policy

A shift to a more expansionary monetary policy will generally _________ in the short run,but if the rapid monetary expansion persists,the long-run result will be ______.(fill in the blanks. )

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In the short run,an unanticipated shift to a more expansionary monetary policy is most likely to result in

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Which of the following best describes the relationship between the velocity of money and the demand for money?

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When the Fed unexpectedly increases the money supply,

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Which of the following contributed to the financial crisis of 2008?

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If expansionary monetary policy reduces real interest rates in the United States,which of the following is most likely to occur?

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Use the figure below to answer the following question(s) . Figure 14-5 -In Figure 14-5,AD₁ and SRAS₁ indicate an economy initially operating at full-employment output level,Y₁.The long-run impact of the Fed unexpectedly shifting to a more restrictive monetary policy will be

Correct AnswerverifiedShow Answer

If the monetary authorities persistently expand the money supply at a rapid rate,the probable result will be

Correct AnswerverifiedShow Answer

When the Fed increases the money supply by buying Treasury securities,it will

Correct AnswerverifiedShow Answer

An unexpected increase in the supply of money will

Correct AnswerverifiedShow Answer

Which of the following interest rates will be least affected by a shift in monetary policy that alters the money supply?

Correct AnswerverifiedShow Answer

Discuss the following views concerning the impact of monetary policy: a.classicals b.Keynesians c.monetarists d."modern view"

Correct Answerverifieda.The classicals believe in the quantity...View AnswerShow Answer

Which of the following interest rates will be most affected by a shift to a more restrictive monetary policy?

Correct AnswerverifiedShow Answer

If the Fed unexpectedly decreases the money supply,real GDP

Correct AnswerverifiedShow Answer

The pre-1930 classical economists thought the primary effect of an increase in the money supply would be

Correct AnswerverifiedShow Answer

When the Fed purchases additional securities and shifts to a more expansionary monetary policy,

Correct AnswerverifiedShow Answer

If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment,which of the following would be most appropriate?

Correct AnswerverifiedShow Answer

In the short run,an unanticipated shift to a more restrictive monetary policy is most likely to result in

Correct AnswerverifiedShow Answer

If the actual federal funds rate is 1 percent,when the target rate called for by the Taylor rule is 5 percent,this indicates that

Correct AnswerverifiedShow Answer

Which of the following will increase interest rates in the short run?

Correct AnswerverifiedShow Answer

A shift to a more expansionary monetary policy will generally ___ in the short run,but if the rapid monetary expansion persists,the long-run result will be .(fill in the blanks. )

Correct Answer
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a.The classicals believe in the quantity...
View Answer

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