Question 1

Which of the following is true?

Accepted Answer

A)  Achieving full employment, stable prices and a satisfactory external balance in the short run facilitates the achievement of sustainable economic growth in the long run.
B)  Sustainable economic growth is determined by the growth and productivity of the labor force only.
C)  Inflation increases the real value of money balances held.
D)  Increases in inflation increase real after-tax returns.

Question 2

Unemployment is a concern to the nation because

Accepted Answer

A)  if the economy is to reach its full potential, all individuals should be given the opportunity to work.
B)  the government budget should be balanced and the more workers that work, the greater the taxes collected.
C)  unemployment will cause a trade deficit.
D)  riot control costs money.

Question 3

What determines the growth of capital, labor, and productivity?

Accepted Answer

A)  the amount of resources devoted to research and development
B)  growth of population
C)  educational attainment and health of workers
D)  All of the above are correct.

Question 4

Because the focus of monetary and fiscal policy tends on the average to be on the short run, it has most often been which of the following?

Accepted Answer

A)  expansionary
B)  contractionary
C)  steady, actually almost stagnant
D)  up and down like a smooth wave

Question 5

Supply-shocks can

Accepted Answer

A)  be beneficial.
B)  be detrimental.
C)  cause rising prices and higher unemployment.
D)  All of the above are correct.

Question 6

In the 2009, most professional estimates of sustainable employment levels suggest an unemployment rate of around

Accepted Answer

A)  3 percent.
B)  4-4.5 percent.
C)  10 percent.
D)  2-3 percent.

Question 7

If the Fed increases demand in response to an adverse supply shock, then

Accepted Answer

A)  the unemployment will get worse but the inflation better.
B)  the unemployment and inflation rates will both fall.
C)  the unemployment rate will go down but the inflation rate will go up.
D)  nothing will happen because an adverse shock shifts the supply curve.

Question 8

What could the Fed do to offset an unexpected increase in aggregate demand?

Accepted Answer

A)  It could lower the discount rate.
B)  It could raise interest rates.
C)  It could lower reserve requirements.
D)  It could reduce aggregate demand by buying securities in the open market.

Question 9

If market participants expect the Fed to increase aggregate demand in response to a drop in aggregate demand, then,

Accepted Answer

A)  the job of policymakers will be much easier.
B)  input prices will respond much more quickly than otherwise.
C)  if the Fed does nothing, the decrease in input prices that cause short run aggregate supply to shift rightward will take longer.
D)  markets will automatically move to equilibrium very quickly.

Question 10

Since the early 1970s, the United States has experienced increased volatility of which of the following?

Accepted Answer

A)  exchange rates
B)  deflation
C)  stagflation
D)  All of the above are correct.

Question 11

Which of the following choices best explains why full employment is an important goal of monetary policy?

Accepted Answer

A)  For a nation to reach its economic potential, individuals must be given an opportunity to become productive (employed)  members of society.
B)  For a nation to maintain price stability, full employment must be attained first.
C)  Full employment ensures that a nation's external balance will be satisfactory.
D)  Full employment is a condition for politicians to be elected.

Question 12

If the real interest rate rises relative to foreign rates, then

Accepted Answer

A)  appreciation of the dollar is likely.
B)  capital inflows could increase.
C)  net exports could fall.
D)  All of the above are correct.

Question 13

Which of the following in not a goal of monetary policy?

Accepted Answer

A)  economic growth
B)  full employment
C)  stable prices
D)  raising enough tax revenue to prevent a government deficit

Question 14

If the Fed establishes goals for inflation and growth that are very different from other countries,

Accepted Answer

A)  flexible exchange rates will return to fixed rates.
B)  there will be substantial fluctuations in exchange rates.
C)  much of the risk of international trading will be eliminated.
D)  the action by the Fed will be investigated by Congress.

Question 15

A condition of concurrent high unemployment and high inflation is called

Accepted Answer

A)  accommodation.
B)  stop-go policy cycle.
C)  stagflation.
D)  a supply shock.

Question 16

A fall in the overall price level is which of the following?

Accepted Answer

A)  inflation
B)  deflation
C)  stagflation
D)  recession

Question 17

Research has shown that as inflation rises,

Accepted Answer

A)  the overall economic environment becomes more steady.
B)  exports will rise as foreign countries draw on inflated U.S. bank holdings.
C)  relative prices become more volatile and difficult to predict.
D)  relative prices tend to become easier to predict.

Question 18

Which of the following acts followed the Employment Act of 1946 in mandating that the government pursue policies to achieve full employment and stable prices?

Accepted Answer

A)  the Financial Institutions Recovery, Reform , and Enforcement Act of 1989
B)  the Garn-St. Germain Act of 1982
C)  the Humphrey-Hawkins Act of 1978
D)  Gramm-Leach-Bliley Act of 1999

Question 19

Any event that shifts the short-run aggregate supply curve is called

Accepted Answer

A)  accommodation.
B)  stop-go policy cycle.
C)  stagflation.
D)  a supply shock.

Exam 23: The Challenges of Monetary Policy

If market participants expect the Fed to increase aggregate demand in response to a drop in aggregate demand, then,

Correct Answer
verified

Any event that shifts the short-run aggregate supply curve is called

Correct Answer
verified

Which of the following acts followed the Employment Act of 1946 in mandating that the government pursue policies to achieve full employment and stable prices?

Correct Answer
verified

A fall in the overall price level is which of the following?

Correct Answer
verified

Which of the following in not a goal of monetary policy?

Correct Answer
verified

Unemployment is a concern to the nation because

Correct Answer
verified

Supply-shocks can

Correct Answer
verified

A condition of concurrent high unemployment and high inflation is called

Correct Answer
verified

Since the early 1970s, the United States has experienced increased volatility of which of the following?

Correct Answer
verified

Because the focus of monetary and fiscal policy tends on the average to be on the short run, it has most often been which of the following?

Correct Answer
verified

Which of the following choices best explains why full employment is an important goal of monetary policy?

Correct Answer
verified

Which of the following is true?

Correct Answer
verified

What could the Fed do to offset an unexpected increase in aggregate demand?

Correct Answer
verified

In the 2009, most professional estimates of sustainable employment levels suggest an unemployment rate of around

Correct Answer
verified

Research has shown that as inflation rises,

Correct Answer
verified

If the Fed increases demand in response to an adverse supply shock, then

Correct Answer
verified

If the real interest rate rises relative to foreign rates, then

Correct Answer
verified

What determines the growth of capital, labor, and productivity?

Correct Answer
verified

If the Fed establishes goals for inflation and growth that are very different from other countries,

Correct Answer
verified

Exam 23: The Challenges of Monetary Policy

If market participants expect the Fed to increase aggregate demand in response to a drop in aggregate demand, then,

Correct AnswerverifiedShow Answer

Any event that shifts the short-run aggregate supply curve is called

Correct AnswerverifiedShow Answer

Which of the following acts followed the Employment Act of 1946 in mandating that the government pursue policies to achieve full employment and stable prices?

Correct AnswerverifiedShow Answer

A fall in the overall price level is which of the following?

Correct AnswerverifiedShow Answer

Which of the following in not a goal of monetary policy?

Correct AnswerverifiedShow Answer

Unemployment is a concern to the nation because

Correct AnswerverifiedShow Answer

Supply-shocks can

Correct AnswerverifiedShow Answer

A condition of concurrent high unemployment and high inflation is called

Correct AnswerverifiedShow Answer

Since the early 1970s, the United States has experienced increased volatility of which of the following?

Correct AnswerverifiedShow Answer

Because the focus of monetary and fiscal policy tends on the average to be on the short run, it has most often been which of the following?

Correct AnswerverifiedShow Answer

Which of the following choices best explains why full employment is an important goal of monetary policy?

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

What could the Fed do to offset an unexpected increase in aggregate demand?

Correct AnswerverifiedShow Answer

In the 2009, most professional estimates of sustainable employment levels suggest an unemployment rate of around

Correct AnswerverifiedShow Answer

Research has shown that as inflation rises,

Correct AnswerverifiedShow Answer

If the Fed increases demand in response to an adverse supply shock, then

Correct AnswerverifiedShow Answer

If the real interest rate rises relative to foreign rates, then

Correct AnswerverifiedShow Answer

What determines the growth of capital, labor, and productivity?

Correct AnswerverifiedShow Answer

If the Fed establishes goals for inflation and growth that are very different from other countries,

Correct AnswerverifiedShow Answer

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