Question 1

The Federal Reserve fights recession via open market operations, the supply of reserves curve shifts
And the supply of money curve shifts _.

Accepted Answer

A)   leftward; leftward
B)   leftward; rightward
C)   rightward; rightward
D)   rightward; leftwardE) A) and D)
F) All of the above

Question 2

Federal Reserve Chairman Ben Bernanke has defined price stability as occurring when core inflation is

Accepted Answer

A)   between 1 and 2 percent.
B)   exactly 0 percent.
C)   less than 10 percent.
D)   used in wage- setting contracts.E) A) and D)
F) A) and C)

Question 3

To increase the quantity of money in the economy, the Federal Reserve is likely to

Accepted Answer

A)   lower tax rates
B)   print more money and give it to the banks.
C)   sell government securities in an open market operation.
D)   buy government securities in an open market operation.E) A) and B)
F) C) and D)

Question 4

Which of the following bodies are responsible for the conduct of monetary policy?

Accepted Answer

A)   the Federal Reserve System
B)   Congress and the President, jointly
C)   Congress
D)   the PresidentE) None of the above
F) C) and D)

Question 5

Federal Reserve monetary policy goals include

Accepted Answer

A)   zero percent unemployment in the domestic economy.
B)   discount rate stability
C)   price level stability
D)   ensuring banks can meet their profit maximization objectives.E) A) and D)
F) C) and D)

Question 6

An increase in the quantity of reserves leads to

Accepted Answer

A)   an excess demand for reserves and a decrease in the federal funds rate.
B)   a leftward shift of the demand curve for reserves and a lower federal funds rate.
C)   a movement down along the demand curve for reserves to a lower federal funds rate.
D)   an increase in the federal funds rate.E) A) and B)
F) B) and C)

Question 7

If the Fed is concerned with recession it will the federal funds rate in order to aggregate demand.

Accepted Answer

A)   lower; decrease
B)   raise; increase
C)   lower; increase
D)   raise; decreaseE) None of the above
F) All of the above

Question 8

Milton Friedman's k- percent money targeting rule makes the quantity of money

Accepted Answer

A)   grow at the same rate independent of the state of the economy.
B)   respond to the state of the economy using all the information available.
C)   respond to the state of the economy according to a specific pre- determined rule.
D)   could work in any of the ways listed above.E) B) and D)
F) B) and C)

Question 9

An instrument rule is based on of the economy while a targeting rule is based on
Of the economy.

Accepted Answer

A)   the current state; a forecast
B)   the previous state; the current state
C)   the current state; the previous state
D)   a forecast; the current stateE) B) and D)
F) All of the above

Question 10

-In the above figure, suppose the economy is at point D. Which of the following occurs as a result of an open market purchase of government securities by the Fed?

Accepted Answer

A)   an increase in investment
B)   an increase in exports
C)   a decrease in the real interest rate
D)   All of the above occur.E) None of the above
F) A) and B)

Question 11

When the Fed buys U.S. government securities from a bank, the Fed

Accepted Answer

A)   decreases the monetary base and raises the federal funds rate.
B)   obtains the money for the purchase from the U.S. Treasury.
C)   increases the bank's reserves at the Fed.
D)   loans the money needed to buy the securities to the bank.E) B) and C)
F) A) and D)

Question 12

The principal goal of monetary policy is to

Accepted Answer

A)   keep the budget deficit small and/or the budget surplus large.
B)   reverse the productivity growth slowdown
C)   lower taxes
D)   maintain low inflationE) A) and B)
F) All of the above

Question 13

The People's Bank of China announced that it was lowering by 1.08 percentage points the one- year lending rate in response to the slowdown in the Chinese economy. This rate is the Chinese equivalent of the federal funds rate in the United States.
HYPERLINK "http://www.nytimes.com/" www.nytimes.com, 11/26/20
This policy the supply of loanable funds. As a result, the long- term real interest rate and planned expenditures _.

Accepted Answer

A)   decreases; increases; increase
B)   decreases; decreases; decrease
C)   increases; increases; increase
D)   increases; decreases; increaseE) None of the above
F) A) and B)

Question 14

"The Bank of Israel lowered its benchmark lending rate by half a percentage point, the fourth cut in weeks, as the global financial turmoil slows economic growth and inflation expectations ease. "
HYPERLINK "http://www.bloomberg.com/" www.bloomberg.com, 11/24/20
The Bank of Israel's actions bank reserves and have the goal of _ consumption.

Accepted Answer

A)   increase; increasing
B)   decrease; increasing
C)   decrease;decreasing
D)   increase;decreasingE) A) and B)
F) All of the above

Question 15

The core inflation rate is more volatile than the total CPI inflation rate.

Accepted Answer

A) True 
 B)False

Question 16

The Taylor Rule maintains that the Fed should set the growth rate of the quantity of money equal to the growth rate of real GDP.

Accepted Answer

A) True 
 B)False

Question 17

Currently the Fed targets

Accepted Answer

A)   both the monetary base and the federal funds rate simultaneously.
B)   the exchange rate.
C)   the price level.
D)   the federal funds rate.E) B) and D)
F) None of the above

Question 18

If the Fed wants to fight inflation, it might the federal funds rate, which in the short run shifts the _.

Accepted Answer

A)   raise; AD curve leftward
B)   raise; AD curve rightward
C)   lower; AD curve rightward
D)   lower; AD curve leftwardE) B) and D)
F) A) and B)

Question 19

In an effort to address the troubled economy, ..."For the ninth time in just over a year, the Federal Re is expected to cut interest rates, quite possibly its last reduction in this downturn." Rates have not this low "... since 2003, when the economy was growing at a snail's pace. "
HYPERLINK "http://www.csmonitor.com/" www.csmonitor.com, 10/28/20
The Fed's rates cuts will initially impact _ and eventually _ _.

Accepted Answer

A)   the money supply; bank reserves
B)   investment; the real interest rate
C)   bank reserves; government spending
D)   bank reserves; real GDPE) A) and D)
F) B) and D)

Question 20

If the Fed sells U.S. government securities to banks, the federal funds rate and banks' reserves at the Fed .

Accepted Answer

A)   rises; increase
B)   falls; decrease
C)   rises; decrease
D)   falls; increaseE) A) and B)
F) A) and C)

Exam 14: Monetary Policy

The Taylor Rule maintains that the Fed should set the growth rate of the quantity of money equal to the growth rate of real GDP.

Correct Answer
verified

If the Fed wants to fight inflation, it might the federal funds rate, which in the short run shifts the _.

Correct Answer
verified

The Federal Reserve fights recession via open market operations, the supply of reserves curve shifts And the supply of money curve shifts _.

Correct Answer
verified

If the Fed sells U.S. government securities to banks, the federal funds rate and banks' reserves at the Fed .

Correct Answer
verified

-In the above figure, suppose the economy is at point D. Which of the following occurs as a result of an open market purchase of government securities by the Fed?

Correct Answer
verified

An increase in the quantity of reserves leads to

Correct Answer
verified

The principal goal of monetary policy is to

Correct Answer
verified

The core inflation rate is more volatile than the total CPI inflation rate.

Correct Answer
verified

When the Fed buys U.S. government securities from a bank, the Fed

Correct Answer
verified

Correct Answer
verified

If the Fed is concerned with recession it will the federal funds rate in order to aggregate demand.

Correct Answer
verified

Federal Reserve monetary policy goals include

Correct Answer
verified

Which of the following bodies are responsible for the conduct of monetary policy?

Correct Answer
verified

Correct Answer
verified

Federal Reserve Chairman Ben Bernanke has defined price stability as occurring when core inflation is

Correct Answer
verified

To increase the quantity of money in the economy, the Federal Reserve is likely to

Correct Answer
verified

Currently the Fed targets

Correct Answer
verified

An instrument rule is based on of the economy while a targeting rule is based on Of the economy.

Correct Answer
verified

Correct Answer
verified

Milton Friedman's k- percent money targeting rule makes the quantity of money

Correct Answer
verified

Exam 14: Monetary Policy

The Taylor Rule maintains that the Fed should set the growth rate of the quantity of money equal to the growth rate of real GDP.

Correct AnswerverifiedShow Answer

If the Fed wants to fight inflation, it might the federal funds rate, which in the short run shifts the _.

Correct AnswerverifiedShow Answer

The Federal Reserve fights recession via open market operations, the supply of reserves curve shifts And the supply of money curve shifts _.

Correct AnswerverifiedShow Answer

If the Fed sells U.S. government securities to banks, the federal funds rate and banks' reserves at the Fed .

Correct AnswerverifiedShow Answer

-In the above figure, suppose the economy is at point D. Which of the following occurs as a result of an open market purchase of government securities by the Fed?

Correct AnswerverifiedShow Answer

An increase in the quantity of reserves leads to

Correct AnswerverifiedShow Answer

The principal goal of monetary policy is to

Correct AnswerverifiedShow Answer

The core inflation rate is more volatile than the total CPI inflation rate.

Correct AnswerverifiedShow Answer

When the Fed buys U.S. government securities from a bank, the Fed

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the Fed is concerned with recession it will the federal funds rate in order to aggregate demand.

Correct AnswerverifiedShow Answer

Federal Reserve monetary policy goals include

Correct AnswerverifiedShow Answer

Which of the following bodies are responsible for the conduct of monetary policy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Federal Reserve Chairman Ben Bernanke has defined price stability as occurring when core inflation is

Correct AnswerverifiedShow Answer

To increase the quantity of money in the economy, the Federal Reserve is likely to

Correct AnswerverifiedShow Answer

Currently the Fed targets

Correct AnswerverifiedShow Answer

An instrument rule is based on of the economy while a targeting rule is based on Of the economy.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Milton Friedman's k- percent money targeting rule makes the quantity of money

Correct AnswerverifiedShow Answer

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verified

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