Question 1

If the Fed carries out an open market operation and sells U.S.government securities,the federal funds rate ________ and the quantity of reserves ________.

Accepted Answer

A)   falls; increases
B)   rises; increases
C)   falls; decreases
D)   rises; decreases

Question 2

Which of the following is one of the Fed's policy goals?

Accepted Answer

A)   help the President win reelection
B)   exchange rate
C)   monetary base
D)   price level stability

Question 3

Which of the following are policy instruments available to the Fed as it tries to achieve its macroeconomic goals?
I. government expenditures on goods and services and taxes
II. the government budget deficit or surplus
III. changes in the federal funds rate

Accepted Answer

A)   I and II
B)   III only
C)   II and III
D)   II only

Question 4

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

Accepted Answer

A)   the Federal Reserve System
B)   Congress
C)   the President
D)   Congress and the President, jointly

Question 5

If the Federal Reserve lowers the Federal funds rate,

Accepted Answer

A)   other short-term interest rates fall.
B)   other short-term interest rates rise.
C)   the exchange rate falls.
D)   Both answers A and C are correct.

Question 6

If the Federal Reserve decreases the Federal funds rate,other short-term interest rates ________ and the exchange rate ________.

Accepted Answer

A)   fall; falls
B)   fall; does not change
C)   fall; rises
D)   do not change; falls

Question 7

In the short run,the Fed's actions to fight an inflationary gap shift the

Accepted Answer

A)   aggregate demand curve rightward.
B)   aggregate demand curve leftward.
C)   short-run aggregate supply curve rightward.
D)   short-run aggregate supply curve leftward.

Question 8

Which of the following is the most important Federal Reserve monetary policy goal?

Accepted Answer

A)   moderate long-term interest rates
B)   minimum unemployment
C)   maximum employment
D)   price level stability

Question 9

If the Fed increases the quantity of reserves,the federal funds rate ________ and the quantity of money ________.

Accepted Answer

A)   rises; increases
B)   rises; decreases
C)   falls; increases
D)   falls; decreases

Question 10

In the short run,a decrease in the federal funds rate by the Fed

Accepted Answer

A)   lowers the real interest rate, decreases investment, and shifts the AD curve rightward.
B)   lowers the real interest rate, increases investment, and shifts the AD curve leftward.
C)   raises the real interest rate, decreases investment, and shifts the AD curve rightward.
D)   None of the above answers is correct.

Question 11

"As the Fed Chases Inflation,Critics Shout,'Faster!' "For weeks,the Fed has broadcast its intention to raise interest rates glacially." The Fed was moving slowly,according to an economist because "...the declining price of oil,economic fundamentals,including productivity and global competition,will keep inflation in check." The Fed,recognizing that the economy was improving stated it planned to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." Other economists disagree with the Fed's restrained policy as a "mistake."
Www) nytimes,7/1/2004
Economists estimate that if the Fed's policy was enacted in July 2004,the impact on the economy

Accepted Answer

A)   will occur to its fullest extent within one month.
B)   can be expected to stretch over one to two years.
C)   will not be evident in the exchange rate market until 2005.
D)   will reach its fullest extent, affecting real GDP, in three to six months.

Question 12

An open market purchase of government securities by the Federal Reserve shifts the ________ reserves curve ________.

Accepted Answer

A)   supply of; leftward
B)   supply of; rightward
C)   demand for; rightward
D)   demand for; leftward

Question 13

If the federal funds rate is below the Fed target,the Fed will conduct an open market sale to increase the federal funds rate to the desired level.

Accepted Answer

A) True 
 B)False

Question 14

In the short-run,lowering the federal funds rate will shift the ________ and ________ real GDP.

Accepted Answer

A)   aggregate demand curve leftward; decrease
B)   aggregate demand curve rightward; increase
C)   aggregate supply curve rightward; increase
D)   aggregate demand curve leftward; increase

Question 15

To fight a recession the Fed will

Accepted Answer

A)   raise the federal funds rate.
B)   lower the federal funds rate.
C)   increase the budget deficit.
D)   decrease taxes.

Question 16

Suppose the economy is in a recession and the Fed lowers the federal funds rate.Then

Accepted Answer

A)   real GDP and the price level will both decrease.
B)   real GDP will increase and the price level will decrease.
C)   real GDP will decrease and the price level will increase.
D)   real GDP and the price level will both increase.

Question 17

If the Fed sells bonds in the open market,net exports will increase.

Accepted Answer

A) True 
 B)False

Question 18

When the Fed lowers the federal funds rate,the U.S.dollar ________ on the foreign exchange market and ________.

Accepted Answer

A)   depreciates; aggregate demand decreases
B)   appreciates; aggregate demand decreases
C)   depreciates; the increase in imports is greater than the increase in exports
D)   depreciates; aggregate demand increases

Question 19

If the Fed carries out an open market operation and sells U.S.government securities,the federal funds rises and the quantity of money decreases.

Accepted Answer

A) True 
 B)False

Question 20

Open market purchases by the Federal Reserve System (the Fed)

Accepted Answer

A)   raise the federal funds rate.
B)   increase bank reserves.
C)   occur when the Fed wants to decrease the quantity of money.
D)   All of the above answers are correct.

Exam 14: Monetary Policy

In the short run,a decrease in the federal funds rate by the Fed

Correct Answer
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In the short run,the Fed's actions to fight an inflationary gap shift the

Correct Answer
verified

Which of the following is the most important Federal Reserve monetary policy goal?

Correct Answer
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Open market purchases by the Federal Reserve System (the Fed)

Correct Answer
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If the Fed sells bonds in the open market,net exports will increase.

Correct Answer
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If the Fed carries out an open market operation and sells U.S.government securities,the federal funds rate and the quantity of reserves .

Correct Answer
verified

An open market purchase of government securities by the Federal Reserve shifts the reserves curve .

Correct Answer
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Which of the following are policy instruments available to the Fed as it tries to achieve its macroeconomic goals? I. government expenditures on goods and services and taxes II. the government budget deficit or surplus III. changes in the federal funds rate

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

Correct Answer
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In the short-run,lowering the federal funds rate will shift the and real GDP.

Correct Answer
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If the Federal Reserve lowers the Federal funds rate,

Correct Answer
verified

If the federal funds rate is below the Fed target,the Fed will conduct an open market sale to increase the federal funds rate to the desired level.

Correct Answer
verified

Which of the following is one of the Fed's policy goals?

Correct Answer
verified

If the Fed carries out an open market operation and sells U.S.government securities,the federal funds rises and the quantity of money decreases.

Correct Answer
verified

Suppose the economy is in a recession and the Fed lowers the federal funds rate.Then

Correct Answer
verified

If the Federal Reserve decreases the Federal funds rate,other short-term interest rates and the exchange rate .

Correct Answer
verified

When the Fed lowers the federal funds rate,the U.S.dollar on the foreign exchange market and .

Correct Answer
verified

If the Fed increases the quantity of reserves,the federal funds rate and the quantity of money .

Correct Answer
verified

To fight a recession the Fed will

Correct Answer
verified

Exam 14: Monetary Policy

In the short run,a decrease in the federal funds rate by the Fed

Correct AnswerverifiedShow Answer

In the short run,the Fed's actions to fight an inflationary gap shift the

Correct AnswerverifiedShow Answer

Which of the following is the most important Federal Reserve monetary policy goal?

Correct AnswerverifiedShow Answer

Open market purchases by the Federal Reserve System (the Fed)

Correct AnswerverifiedShow Answer

If the Fed sells bonds in the open market,net exports will increase.

Correct AnswerverifiedShow Answer

If the Fed carries out an open market operation and sells U.S.government securities,the federal funds rate ________ and the quantity of reserves ________.

Correct AnswerverifiedShow Answer

An open market purchase of government securities by the Federal Reserve shifts the ________ reserves curve ________.

Correct AnswerverifiedShow Answer

Which of the following are policy instruments available to the Fed as it tries to achieve its macroeconomic goals? I. government expenditures on goods and services and taxes II. the government budget deficit or surplus III. changes in the federal funds rate

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the short-run,lowering the federal funds rate will shift the ________ and ________ real GDP.

Correct AnswerverifiedShow Answer

If the Federal Reserve lowers the Federal funds rate,

Correct AnswerverifiedShow Answer

If the federal funds rate is below the Fed target,the Fed will conduct an open market sale to increase the federal funds rate to the desired level.

Correct AnswerverifiedShow Answer

Which of the following is one of the Fed's policy goals?

Correct AnswerverifiedShow Answer

If the Fed carries out an open market operation and sells U.S.government securities,the federal funds rises and the quantity of money decreases.

Correct AnswerverifiedShow Answer

Suppose the economy is in a recession and the Fed lowers the federal funds rate.Then

Correct AnswerverifiedShow Answer

If the Federal Reserve decreases the Federal funds rate,other short-term interest rates ________ and the exchange rate ________.

Correct AnswerverifiedShow Answer

When the Fed lowers the federal funds rate,the U.S.dollar ________ on the foreign exchange market and ________.

Correct AnswerverifiedShow Answer

If the Fed increases the quantity of reserves,the federal funds rate ________ and the quantity of money ________.

Correct AnswerverifiedShow Answer

To fight a recession the Fed will

Correct AnswerverifiedShow Answer

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If the Fed carries out an open market operation and sells U.S.government securities,the federal funds rate and the quantity of reserves .

Correct Answer
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An open market purchase of government securities by the Federal Reserve shifts the reserves curve .

Correct Answer
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Correct Answer
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In the short-run,lowering the federal funds rate will shift the and real GDP.

Correct Answer
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If the Federal Reserve decreases the Federal funds rate,other short-term interest rates and the exchange rate .

Correct Answer
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When the Fed lowers the federal funds rate,the U.S.dollar on the foreign exchange market and .

Correct Answer
verified

If the Fed increases the quantity of reserves,the federal funds rate and the quantity of money .

Correct Answer
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Correct Answer
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