Question 1

________ policy is when a central bank acts to decrease the money supply in an effort to control an economy that is expanding too quickly.

Accepted Answer

A)   Expansionary monetary
B)   Expansionary fiscal
C)   Contractionary monetary
D)   Contractionary fiscal
E)   Countercyclical monetary

Question 2

Refer to the following figure to answer the questions that follow.
 
-According to the figure,contractionary monetary policy will cause an economy that is initially at full employment output to go from equilibrium ________ to equilibrium ________ in the short run.

Accepted Answer

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

Question 3

By shifting aggregate demand,monetary policy can affect ________ and ________.

Accepted Answer

A)   real gross domestic product (GDP) ; unemployment
B)   real GDP; interest rates
C)   interest rates; unemployment
D)   money supply; real GDP
E)   money supply; unemployment

Question 4

The sale of existing government bonds by the Federal Reserve will:

Accepted Answer

A)   have no effect on the money supply.
B)   increase the money supply.
C)   increase the reserves at banks.
D)   decrease the amount of government bonds held at banks.
E)   decrease the money supply.

Question 5

When the Fed buys bonds from financial institutions,new money moves directly:

Accepted Answer

A)   out of the loanable funds market.
B)   into the hands of consumers.
C)   into the loanable funds market.
D)   out of the hands of consumers.
E)   into short-run aggregate supply.

Question 6

________ policy is when a central bank acts to increase the money supply in an effort to stimulate the economy.

Accepted Answer

A)   Expansionary monetary
B)   Expansionary fiscal
C)   Contractionary monetary
D)   Contractionary fiscal
E)   Countercyclical monetary

Question 7

Injecting new money into the economy eventually causes:

Accepted Answer

A)   a recession.
B)   deflation.
C)   stagflation.
D)   unemployment.
E)   inflation.

Question 8

Expansionary monetary policy can have immediate real short-run effects; initially,no prices have adjusted.But as prices adjust in the long run,the real impact of monetary policy:

Accepted Answer

A)   is multiplied.
B)   is negative.
C)   is cut in half.
D)   dissipates completely.
E)   is unknown.

Question 9

From 1982 to 2008,the economy experienced only two recessions,and they were neither lengthy nor severe.This time period is known as the:

Accepted Answer

A)   Great Depression.
B)   Great Recession.
C)   great expansion.
D)   great moderation.
E)   great economy.

Question 10

Why does changing the reserve requirement prove less effective than open market operations?

Accepted Answer

Small changes in the money multiplier ca...

Question 11

Monetary neutrality is:

Accepted Answer

A)   when a central bank acts to increase the money supply.
B)   when a central bank acts to decrease the money supply.
C)   the short-run inverse relationship between inflation and unemployment rates.
D)   the combination of high unemployment and high inflation.
E)   the idea that the money supply does not affect real economic variables.

Question 12

The two types of monetary policy are:

Accepted Answer

A)   monetary and fiscal.
B)   expansionary and contractionary.
C)   countercyclical and pro-cyclical.
D)   positive and negative.
E)   pro and con.

Question 13

Refer to the following figure to answer the questions that follow.
 
-According to the figure,if the economy started at full employment output,expansionary monetary policy would cause real gross domestic product (GDP) to ________ in the short run.

Accepted Answer

A)   increase from Y1 to Y2
B)   increase from Y1 to Y3
C)   decrease from Y2 to Y1
D)   decrease from Y3 to Y2
E)   increase from Y2 to Y3

Question 14

Central banks can use monetary policy to:

Accepted Answer

A)   turn prices from inflexible to flexible.
B)   force private banks to lend out reserves.
C)   make it easier for people and businesses to borrow.
D)   print money.
E)   steer the economy out of overexpansion.

Question 15

Explain why workers have an incentive to expect a certain level of inflation.

Accepted Answer

Workers have an incentive to expect a ce...

Question 16

To avoid the negative effects of unexpected inflation,workers have an incentive to:

Accepted Answer

A)   lock in their current wages for years.
B)   stay unemployed during years of inflation.
C)   never negotiate wage contracts.
D)   change jobs regularly.
E)   expect a certain level of inflation and to negotiate their contracts accordingly.

Question 17

If prompted to describe fundamental beliefs about the economy,a Keynesian economist would state that:

Accepted Answer

A)   the long run is more important than the short run.
B)   prices are flexible.
C)   more focus should be placed on the short run than the long run.
D)   savings is crucial to growth.
E)   the market tends toward stability and full employment.

Question 18

What will economists today likely state should have been done to limit the severity of the Great Depression?

Accepted Answer

A)   The Fed should have done more to decrease the money supply at the onset.
B)   The Fed should have done more to decrease the inflation at the onset.
C)   The Fed should have reacted more quickly to decrease the money supply.
D)   The Fed should have waited longer before trying to raise the money supply.
E)   The Fed should have done more to offset the decline in the money supply at the onset.

Question 19

________ would be helped by unexpected inflation.

Accepted Answer

A)   Someone who loaned money out at a fixed interest rate
B)   Someone who signed a two-year contract at a fixed wage
C)   Someone who borrowed money at a fixed interest rate
D)   A worker whose wage increases with expected inflation
E)   Elderly individuals on a fixed income

Question 20

When considering how the economy works,classical economists hold that:

Accepted Answer

A)   prices are sticky.
B)   savings is a drain on demand.
C)   the market tends toward instability and cyclical unemployment.
D)   the long run is more significant than the short run.
E)   the economy needs help in moving back to full employment.

Exam 16: Monetary Policy

Refer to the following figure to answer the questions that follow. -According to the figure,if the economy started at full employment output,expansionary monetary policy would cause real gross domestic product (GDP) to ________ in the short run.

Correct AnswerverifiedShow Answer

Explain why workers have an incentive to expect a certain level of inflation.

Correct AnswerverifiedWorkers have an incentive to expect a ce...View AnswerShow Answer

When considering how the economy works,classical economists hold that:

Correct AnswerverifiedShow Answer

The two types of monetary policy are:

Correct AnswerverifiedShow Answer

By shifting aggregate demand,monetary policy can affect ________ and ________.

Correct AnswerverifiedShow Answer

________ would be helped by unexpected inflation.

Correct AnswerverifiedShow Answer

If prompted to describe fundamental beliefs about the economy,a Keynesian economist would state that:

Correct AnswerverifiedShow Answer

To avoid the negative effects of unexpected inflation,workers have an incentive to:

Correct AnswerverifiedShow Answer

Expansionary monetary policy can have immediate real short-run effects; initially,no prices have adjusted.But as prices adjust in the long run,the real impact of monetary policy:

Correct AnswerverifiedShow Answer

Injecting new money into the economy eventually causes:

Correct AnswerverifiedShow Answer

The sale of existing government bonds by the Federal Reserve will:

Correct AnswerverifiedShow Answer

________ policy is when a central bank acts to decrease the money supply in an effort to control an economy that is expanding too quickly.

Correct AnswerverifiedShow Answer

What will economists today likely state should have been done to limit the severity of the Great Depression?

Correct AnswerverifiedShow Answer

When the Fed buys bonds from financial institutions,new money moves directly:

Correct AnswerverifiedShow Answer

________ policy is when a central bank acts to increase the money supply in an effort to stimulate the economy.

Correct AnswerverifiedShow Answer

Why does changing the reserve requirement prove less effective than open market operations?

Correct AnswerverifiedSmall changes in the money multiplier ca...View AnswerShow Answer

Refer to the following figure to answer the questions that follow. -According to the figure,contractionary monetary policy will cause an economy that is initially at full employment output to go from equilibrium ________ to equilibrium ________ in the short run.

Correct AnswerverifiedShow Answer

From 1982 to 2008,the economy experienced only two recessions,and they were neither lengthy nor severe.This time period is known as the:

Correct AnswerverifiedShow Answer

Monetary neutrality is:

Correct AnswerverifiedShow Answer

Central banks can use monetary policy to:

Correct AnswerverifiedShow Answer

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Workers have an incentive to expect a ce...
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By shifting aggregate demand,monetary policy can affect and .

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Small changes in the money multiplier ca...
View Answer

Refer to the following figure to answer the questions that follow. -According to the figure,contractionary monetary policy will cause an economy that is initially at full employment output to go from equilibrium to equilibrium in the short run.

Correct Answer
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Correct Answer
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