Question 1

Congress and the president are the key decision makers for U.S.monetary policy.

Accepted Answer

A) True 
 B)False

Question 2

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet.
 
-In Table 14.2,the level of total reserves is equal to:

Accepted Answer

A)   $60 billion.
B)   $260 billion.
C)   $460 billion.
D)   $660 billion.

Question 3

By changing the reserve requirement the Fed can change the level of bank reserves and the lending capacity of the banking system.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is often described as the most powerful person in the U.S.economy?

Accepted Answer

A)   The president of the United States.
B)   The Speaker of the House of Representatives.
C)   The chairman of the House Ways and Means Committee.
D)   The chairman of the Federal Reserve.

Question 5

Given an upward-sloping aggregate supply curve,which of the following is most likely to occur if the Fed pursues restrictive monetary policy,ceteris paribus?

Accepted Answer

A)   The equilibrium price level and output will both decrease.
B)   The equilibrium price level and output will both increase.
C)   The equilibrium price level will decrease but output will stay the same.
D)   The equilibrium output will decrease but the price level will stay the same.

Question 6

The different shapes of the aggregate supply curve:

Accepted Answer

A)   Determine the level of reserves held by the banking system.
B)   Result in the Fed's need for total control of the money supply.
C)   Determine the impact of monetary policy on price level and output.
D)   Explain why the Fed must respond to market instability.

Question 7

One News Wire article in the text is titled "Fed Cuts Key Interest Rate Half-Point to 1 Percent." Which of the following is the Fed trying to accomplish as a result of this action?

Accepted Answer

A)   A leftward shift of aggregate demand.
B)   A rightward shift of aggregate demand.
C)   A leftward shift of aggregate supply.
D)   A rightward shift of aggregate supply.

Question 8

The basic money supply:

Accepted Answer

A)   Is controlled by Congress and the U.S.Treasury.
B)   Includes savings accounts.
C)   Includes currency and transactions accounts.
D)   Includes money market mutual funds.

Question 9

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet.
 
-Considering only the information in Table 14.1,the basic money supply is:

Accepted Answer

A)   $120 billion.
B)   $800 billion.
C)   $920 billion.
D)   $1 trillion.

Question 10

Which of the following is not a basic monetary policy tool used by the Fed?

Accepted Answer

A)   The discount rate.
B)   The reserve requirement.
C)   Taxes.
D)   Open-market operations.

Question 11

When the Fed sells bonds,bank reserves increase.

Accepted Answer

A) True 
 B)False

Question 12

The reserve requirement is the tool used least frequently by the Fed because it can cause abrupt changes in the money supply.

Accepted Answer

A) True 
 B)False

Question 13

Figure 14.1 1 to AD2 B)  Expand;AS1 to AS2 C)  Contract;AD2 to AD1 D)  Contract;AS3 to AS2" class="answers-bank-image d-inline" rel="preload" >
-Using Figure 14.1,ceteris paribus,if the Federal Reserve increases the discount rate,this indicates a desire to _______ the money supply and will cause a shift from ______.

Accepted Answer

A)   Expand;AD1 to AD2
B)   Expand;AS1 to AS2
C)   Contract;AD2 to AD1
D)   Contract;AS3 to AS2

Question 14

Under Alan Greenspan,the Fed:

Accepted Answer

A)   Targeted interest rates only.
B)   Targeted the money supply only.
C)   Targeted the unemployment level.
D)   Used a mix of money-supply and interest-rate adjustments.

Question 15

If the Fed wishes to increase the money supply it can:

Accepted Answer

A)   Raise the federal funds rate.
B)   Sell bonds on the open market.
C)   Decrease the discount rate.
D)   Increase the required reserve ratio.

Question 16

The use of money and credit controls to change macroeconomic activity is known as:

Accepted Answer

A)   Fiscal policy.
B)   Monetary policy.
C)   Supply-side policy.
D)   Eclectic policy.

Question 17

The reserve requirement:

Accepted Answer

A)   Is the most frequently used tool by the Fed.
B)   Changes required reserves but not excess reserves.
C)   Does not affect the lending capacity for a bank.
D)   Affects the level of bank reserves.

Question 18

Figure 14.2 3 to AD4 will cause,ceteris paribus: A)  An increase in real output and an increase in the price level. B)  An increase in real output,but no change in the price level. C)  An increase in the price level,but no change in real output. D)  A decrease in the price level,but no change in real output." class="answers-bank-image d-inline" rel="preload" > 
-Using Figure 14.2,a shift in aggregate demand from AD3 to AD4 will cause,ceteris paribus:

Accepted Answer

A)   An increase in real output and an increase in the price level.
B)   An increase in real output,but no change in the price level.
C)   An increase in the price level,but no change in real output.
D)   A decrease in the price level,but no change in real output.

Question 19

According to the aggregate supply drawn under the monetarist view,which of the following would lead to a higher price level?

Accepted Answer

A)   The purchase of bonds in the open market by the Fed.
B)   An increase in the discount rate.
C)   An increase in the reserve requirement.
D)   A decrease in the money multiplier.

Question 20

One News Wire article in the text has the title "Fed Cuts Key Interest Rate Half-Point to 1 Percent." Assuming the economy is in the upward sloping portion of the eclectic aggregate supply curve,what should happen to the price level and output as a result of the Fed's action,ceteris paribus?

Accepted Answer

A)   The equilibrium price level and equilibrium output should both increase.
B)   The equilibrium price level should increase and equilibrium output should decrease.
C)   The equilibrium price level should decrease and equilibrium output should increase.
D)   The equilibrium price level and equilibrium output should both decrease.

Exam 14: Monetary Policy

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet. -Considering only the information in Table 14.1,the basic money supply is:

Correct AnswerverifiedShow Answer

The basic money supply:

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Under Alan Greenspan,the Fed:

Correct AnswerverifiedShow Answer

One News Wire article in the text has the title "Fed Cuts Key Interest Rate Half-Point to 1 Percent." Assuming the economy is in the upward sloping portion of the eclectic aggregate supply curve,what should happen to the price level and output as a result of the Fed's action,ceteris paribus?

Correct AnswerverifiedShow Answer

Figure 14.1 -Using Figure 14.1,ceteris paribus,if the Federal Reserve increases the discount rate,this indicates a desire to _______ the money supply and will cause a shift from ______.

Correct AnswerverifiedShow Answer

The reserve requirement is the tool used least frequently by the Fed because it can cause abrupt changes in the money supply.

Correct AnswerverifiedShow Answer

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet. -In Table 14.2,the level of total reserves is equal to:

Correct AnswerverifiedShow Answer

The use of money and credit controls to change macroeconomic activity is known as:

Correct AnswerverifiedShow Answer

According to the aggregate supply drawn under the monetarist view,which of the following would lead to a higher price level?

Correct AnswerverifiedShow Answer

If the Fed wishes to increase the money supply it can:

Correct AnswerverifiedShow Answer

By changing the reserve requirement the Fed can change the level of bank reserves and the lending capacity of the banking system.

Correct AnswerverifiedShow Answer

Which of the following is often described as the most powerful person in the U.S.economy?

Correct AnswerverifiedShow Answer

The different shapes of the aggregate supply curve:

Correct AnswerverifiedShow Answer

Which of the following is not a basic monetary policy tool used by the Fed?

Correct AnswerverifiedShow Answer

Given an upward-sloping aggregate supply curve,which of the following is most likely to occur if the Fed pursues restrictive monetary policy,ceteris paribus?

Correct AnswerverifiedShow Answer

One News Wire article in the text is titled "Fed Cuts Key Interest Rate Half-Point to 1 Percent." Which of the following is the Fed trying to accomplish as a result of this action?

Correct AnswerverifiedShow Answer

When the Fed sells bonds,bank reserves increase.

Correct AnswerverifiedShow Answer

The reserve requirement:

Correct AnswerverifiedShow Answer

Congress and the president are the key decision makers for U.S.monetary policy.

Correct AnswerverifiedShow Answer

Figure 14.2 -Using Figure 14.2,a shift in aggregate demand from AD3 to AD4 will cause,ceteris paribus:

Correct AnswerverifiedShow Answer

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Figure 14.1 -Using Figure 14.1,ceteris paribus,if the Federal Reserve increases the discount rate,this indicates a desire to _ the money supply and will cause a shift from .

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Figure 14.2 -Using Figure 14.2,a shift in aggregate demand from AD₃ to AD₄ will cause,ceteris paribus:

Correct Answer
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