Question 1

If the nominal interest rate is a constant 15 percent and anticipated inflation falls from 10 percent to 7 percent,the real interest rate would change from

Accepted Answer

A)  15 to 10 percent.
B)  5 to 8 percent.
C)  7 to 9 percent.

Question 2

According to Bernanke's policy guide,a half percentage point increase in long-term interest rates will

Accepted Answer

A)  Increase AD by $50 billion.
B)  Decrease AD by $100 billion.
C)  Increase AS by $50 billion.

Question 3

In periods of restrictive monetary policy,which of the following industries are likely to feel a disproportionately large impact of the policy?

Accepted Answer

A)  The auto industry.
B)  Fast-food restaurants.
C)  Cell phone service providers.

Question 4

The federal funds rate reflects the cost for banks to borrow from other banks.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a monetarist assumption that plays a key role in explaining the ineffectiveness of fiscal policy?

Accepted Answer

A)  The liquidity trap.
B)  The instability in the velocity of money.
C)  Crowding out.

Question 6

The effectiveness of monetary policy is influenced by

Accepted Answer

A)  The time it takes for lower interest rates to make investment spending more profitable.
B)  The willingness of Congress to implement it.
C)  How responsive the money supply is to changes in taxes.

Question 7

Which of the following is a series of events that accurately describes the steps by which restrictive monetary policy is effective?

Accepted Answer

A)  Decrease in interest rate,decrease in M1,and increase in investment.
B)  Decrease in M1,increase in interest rate,and decrease in investment.
C)  Increase in M1,decrease in investment,and decrease in interest rate.

Question 8

The In the News article titled "Prices Are low! Mortgages Cheap! But You Can't Get One" indicates that

Accepted Answer

A)  Mortgage interest rates are higher,down payments are higher,and home prices are higher.
B)  Mortgage interest rates are lower,down payments are lower,and home prices are lower.
C)  Mortgage interest rates are lower,down payments are higher,and home prices are lower.

Question 9

Using the equation of exchange and assuming full employment and a constant velocity of money,a decrease in the required reserve ratio would result in a

Accepted Answer

A)  Lower velocity.
B)  Lower quantity of real output.
C)  Higher price level.

Question 10

-In Figure 15.4,an increase in the money supply from $65 billion to $100 billion will cause the equilibrium rate of interest to

Accepted Answer

A)  Decrease from 7 percent to 5 percent.
B)  Increase from 5 percent to 7 percent.
C)  Decrease from 7 percent to 3 percent.

Question 11

According to Bernanke's policy guide,a full-point decrease in long-term interest rates results in a

Accepted Answer

A)  $10 billion stimulus for the economy.
B)  $20 billion stimulus for the economy.
C)  $200 billion stimulus for the economy.

Question 12

Money held for making everyday market purchases represents the

Accepted Answer

A)  Crisis demand for money.
B)  Speculative demand for money.
C)  Transactions demand for money.

Question 13

In making monetary policy the Fed currently

Accepted Answer

A)  Increases the money supply at a fixed rate each year.
B)  Has adopted the monetarist view and "leans against the wind."
C)  Focuses on the federal funds rate.

Question 14

Which of the following is a monetarist solution for a recession?

Accepted Answer

A)  Steady and predictable growth of the money supply.
B)  A decrease in short-term interest rates.
C)  An increase in the money supply alone.

Question 15

-In Figure 15.4,an increase in the money supply from $100 billion to $135 billion will cause a

Accepted Answer

A)  $40 billion increase in investment.
B)  Decrease in the interest rate.
C)  Decrease in aggregate demand.

Question 16

The quantity of money people are willing and able to hold at alternative interest rates,ceteris paribus,is known as the

Accepted Answer

A)  Demand for money.
B)  Supply of money.
C)  Equilibrium of money.

Question 17

A decrease in aggregate demand could be caused by

Accepted Answer

A)  A decrease in the value of the domestic currency.
B)  A booming economy.
C)  Contractionary monetary policy.

Question 18

A horizontal aggregate supply curve causes higher inflation,rather than higher output,to result from increases in the money supply.

Accepted Answer

A) True 
 B)False

Question 19

If the real rate of interest is negative,then,ceteris paribus,

Accepted Answer

A)  The nominal interest rate is negative.
B)  Monetary policy is tight.
C)  The nominal interest rate is less than the anticipated inflation rate.

Question 20

If the anticipated inflation rate is 5 percent and the nominal interest rate is 9 percent,the real interest rate will be

Accepted Answer

A)  4 percent.
B)  Negative 14 percent.
C)  14 percent.

Exam 15: Monetary Policy

A horizontal aggregate supply curve causes higher inflation,rather than higher output,to result from increases in the money supply.

Correct AnswerverifiedShow Answer

Which of the following is a monetarist solution for a recession?

Correct AnswerverifiedShow Answer

The quantity of money people are willing and able to hold at alternative interest rates,ceteris paribus,is known as the

Correct AnswerverifiedShow Answer

Which of the following is a monetarist assumption that plays a key role in explaining the ineffectiveness of fiscal policy?

Correct AnswerverifiedShow Answer

If the anticipated inflation rate is 5 percent and the nominal interest rate is 9 percent,the real interest rate will be

Correct AnswerverifiedShow Answer

If the nominal interest rate is a constant 15 percent and anticipated inflation falls from 10 percent to 7 percent,the real interest rate would change from

Correct AnswerverifiedShow Answer

A decrease in aggregate demand could be caused by

Correct AnswerverifiedShow Answer

The In the News article titled "Prices Are low! Mortgages Cheap! But You Can't Get One" indicates that

Correct AnswerverifiedShow Answer

According to Bernanke's policy guide,a half percentage point increase in long-term interest rates will

Correct AnswerverifiedShow Answer

The effectiveness of monetary policy is influenced by

Correct AnswerverifiedShow Answer

-In Figure 15.4,an increase in the money supply from $65 billion to $100 billion will cause the equilibrium rate of interest to

Correct AnswerverifiedShow Answer

Using the equation of exchange and assuming full employment and a constant velocity of money,a decrease in the required reserve ratio would result in a

Correct AnswerverifiedShow Answer

According to Bernanke's policy guide,a full-point decrease in long-term interest rates results in a

Correct AnswerverifiedShow Answer

In periods of restrictive monetary policy,which of the following industries are likely to feel a disproportionately large impact of the policy?

Correct AnswerverifiedShow Answer

If the real rate of interest is negative,then,ceteris paribus,

Correct AnswerverifiedShow Answer

In making monetary policy the Fed currently

Correct AnswerverifiedShow Answer

-In Figure 15.4,an increase in the money supply from $100 billion to $135 billion will cause a

Correct AnswerverifiedShow Answer

The federal funds rate reflects the cost for banks to borrow from other banks.

Correct AnswerverifiedShow Answer

Which of the following is a series of events that accurately describes the steps by which restrictive monetary policy is effective?

Correct AnswerverifiedShow Answer

Money held for making everyday market purchases represents the

Correct AnswerverifiedShow Answer

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