Question 1

When inflation is expected,the real effect on the economy is:

Accepted Answer

A)   amplified.
B)   positive.
C)   negative.
D)   limited.
E)   delayed.

Question 2

To decrease the money supply,the Federal Reserve could do which of the following?

Accepted Answer

A)   increase the discount rate
B)   decrease the required reserve ratio
C)   forbid the reselling of government bonds
D)   encourage banks to lend money to borrowers
E)   conduct an open market purchase of government bonds

Question 3

Economists who discount the short-run expansionary effects of monetary policy focus on the problems of:

Accepted Answer

A)   inflation.
B)   government intervention.
C)   fiscal policy.
D)   unemployment.
E)   disinflation.

Question 4

As the prices of goods and services decrease,the value of money:

Accepted Answer

A)   stays the same.
B)   increases.
C)   decreases.
D)   increases initially and then decreases.
E)   decreases initially and then increases.

Question 5

________ would be hurt by unexpected inflation.

Accepted Answer

A)   Someone who borrowed money at a fixed interest rate
B)   A firm who hired a worker on a two-year wage contract
C)   A worker who signed a two-year wage contract
D)   A worker whose wage increases with inflation
E)   A firm that purchased inputs with a two-year contract

Question 6

Consider this excerpt from the textbook: "From 1929 to 1933,prior to the establishment of federal deposit insurance,over 9,000 banks failed in the United States.Because of these bank failures,people began holding their money outside the banking system.This action contributed to a significant contraction in the money supply....After peaking at $676 billion in 1931,the M2 money supply fell to just $564 billion in 1933.This drastic decline was one of the major causes of the Great Depression." Looking back on the Great Depression,what do most economists believe the Federal Reserve should have done to try to limit the negative effects of the Depression?

Accepted Answer

Mainstream economists today agree that t...

Question 7

Which of the following explains why the money supply is NOT completely controlled by the Federal Reserve?

Accepted Answer

A)   The actions of private individuals and banks can increase or decrease the money supply via the money multiplier.
B)   The president can issue an executive order that can increase or decrease the money supply.
C)   The treasury has say over when the Federal Reserve can increase or decrease the money supply.
D)   The actions of private individuals and banks can increase or decrease the money supply via the spending multiplier.
E)   Congress has authority to veto any monetary policy enacted by the Federal Reserve.

Question 8

Because you are an economics student,your parents are always asking you about the macroeconomy.Over the past few months,they have seen the economy expanding at a very fast pace and your parents are worried about inflation.Your parents ask you,"What type of monetary policy do you expect the Federal Reserve to conduct if it expected high levels of inflation were on the horizon?" Explain your answer.

Accepted Answer

If high inflation was expected,the Feder...

Question 9

According to the Fisher equation,if a bank extends a loan for 3% and the inflation rate ends up being 2%,the:

Accepted Answer

A)   nominal interest rate is 1%.
B)   real interest rate is 1%.
C)   nominal interest rate is -1%.
D)   real interest rate is -1%.
E)   nominal interest rate is 5%.

Question 10

You have just been chosen as an economist on the Board of Governors for the Federal Reserve.After years of constant growth,the U.S.economy begins to fall into a recession.What type of monetary policy do you suggest to the board and why?

Accepted Answer

Expansionary monetary policy should be s...

Question 11

Unexpected inflation harms workers and other resource suppliers who have ________ prices in the ________ run.

Accepted Answer

A)   flexible; short
B)   fixed; short
C)   fixed; long
D)   flexible; medium

Question 12

Contractionary monetary policy ________ interest rates,causing ________ to shift to the ________.

Accepted Answer

A)   lowers; aggregate demand; right
B)   lowers; aggregate demand; left
C)   raises; aggregate demand; right
D)   raises; aggregate demand; left
E)   lowers; short-run aggregate supply; right

Question 13

In the short run,expansionary monetary policy ________ real gross domestic product (GDP) ,________ unemployment,and ________ the price level.

Accepted Answer

A)   raises; lowers; raises
B)   raises; raises; raises
C)   lowers; lowers; raises
D)   lowers; lowers; lowers
E)   raises; lowers; lowers

Question 14

Which of the following best explains how the money supply changed during the early part of the Great Depression?

Accepted Answer

A)   In the early part of the Great Depression, the money supply increased due to uncertainty and unemployment.
B)   In the early part of the Great Depression, the money supply decreased due to individuals withdrawing funds and holding more currency.
C)   In the early part of the Great Depression, the money supply increased due to individuals withdrawing funds and holding more currency.
D)   In the early part of the Great Depression, the money supply increased due to huge bond-buying programs by the Federal Reserve.
E)   In the early part of the Great Depression, the money supply decreased due to huge bond-buying programs by the Federal Reserve.

Question 15

During a financial crisis hit hard by bank failures,the money supply:

Accepted Answer

A)   decreases because people start putting money into savings accounts.
B)   increases because people start putting money into savings accounts.
C)   increases because people start withdrawing their money from banks.
D)   decreases because people start withdrawing their money from banks.
E)   increases because people spend more instead of saving more.

Question 16

Explain the difference between expansionary monetary policy and contractionary monetary policy.

Accepted Answer

Expansionary monetary policy occurs when...

Question 17

What is quantitative easing? What are the benefits of this new monetary tool?

Accepted Answer

Quantitative easing is the targeted use ...

Question 18

In the short run,some prices are inflexible.Most often,the prices that are inflexible are:

Accepted Answer

A)   output prices.
B)   energy prices.
C)   food prices.
D)   product prices.
E)   wages for workers.

Question 19

Which of the following aggregate demand-aggregate supply models illustrates the short-run effects of contractionary monetary policy?

Accepted Answer

A)  A. 
B)   
C)   
D)   
E)

Question 20

If the interest rate on a loan is lower than the expected return from an investment:

Accepted Answer

A)   a rational firm will take out a loan for the investment.
B)   the Federal Reserve will conduct contractionary monetary policy.
C)   a rational firm will not take out a loan for the investment.
D)   the Federal Reserve will conduct expansionary monetary policy.
E)   the government will conduct expansionary fiscal policy.

Exam 16: Monetary Policy

To decrease the money supply,the Federal Reserve could do which of the following?

Correct Answer
verified

In the short run,some prices are inflexible.Most often,the prices that are inflexible are:

Correct Answer
verified

As the prices of goods and services decrease,the value of money:

Correct Answer
verified

________ would be hurt by unexpected inflation.

Correct Answer
verified

Explain the difference between expansionary monetary policy and contractionary monetary policy.

Correct Answer
verified
Expansionary monetary policy occurs when...
View Answer

Which of the following explains why the money supply is NOT completely controlled by the Federal Reserve?

Correct Answer
verified

What is quantitative easing? What are the benefits of this new monetary tool?

Correct Answer
verified
Quantitative easing is the targeted use ...
View Answer

Which of the following best explains how the money supply changed during the early part of the Great Depression?

Correct Answer
verified

You have just been chosen as an economist on the Board of Governors for the Federal Reserve.After years of constant growth,the U.S.economy begins to fall into a recession.What type of monetary policy do you suggest to the board and why?

Correct Answer
verified
Expansionary monetary policy should be s...
View Answer

Correct Answer
verified
Mainstream economists today agree that t...
View Answer

If the interest rate on a loan is lower than the expected return from an investment:

Correct Answer
verified

During a financial crisis hit hard by bank failures,the money supply:

Correct Answer
verified

In the short run,expansionary monetary policy real gross domestic product (GDP) , unemployment,and the price level.

Correct Answer
verified

Contractionary monetary policy interest rates,causing to shift to the .

Correct Answer
verified

According to the Fisher equation,if a bank extends a loan for 3% and the inflation rate ends up being 2%,the:

Correct Answer
verified

Economists who discount the short-run expansionary effects of monetary policy focus on the problems of:

Correct Answer
verified

Which of the following aggregate demand-aggregate supply models illustrates the short-run effects of contractionary monetary policy?

Correct Answer
verified

Unexpected inflation harms workers and other resource suppliers who have prices in the run.

Correct Answer
verified

Correct Answer
verified
If high inflation was expected,the Feder...
View Answer

When inflation is expected,the real effect on the economy is:

Correct Answer
verified

Exam 16: Monetary Policy

To decrease the money supply,the Federal Reserve could do which of the following?

Correct AnswerverifiedShow Answer

In the short run,some prices are inflexible.Most often,the prices that are inflexible are:

Correct AnswerverifiedShow Answer

As the prices of goods and services decrease,the value of money:

Correct AnswerverifiedShow Answer

________ would be hurt by unexpected inflation.

Correct AnswerverifiedShow Answer

Explain the difference between expansionary monetary policy and contractionary monetary policy.

Correct AnswerverifiedExpansionary monetary policy occurs when...View AnswerShow Answer

Which of the following explains why the money supply is NOT completely controlled by the Federal Reserve?

Correct AnswerverifiedShow Answer

What is quantitative easing? What are the benefits of this new monetary tool?

Correct AnswerverifiedQuantitative easing is the targeted use ...View AnswerShow Answer

Which of the following best explains how the money supply changed during the early part of the Great Depression?

Correct AnswerverifiedShow Answer

You have just been chosen as an economist on the Board of Governors for the Federal Reserve.After years of constant growth,the U.S.economy begins to fall into a recession.What type of monetary policy do you suggest to the board and why?

Correct AnswerverifiedExpansionary monetary policy should be s...View AnswerShow Answer

Correct AnswerverifiedMainstream economists today agree that t...View AnswerShow Answer

If the interest rate on a loan is lower than the expected return from an investment:

Correct AnswerverifiedShow Answer

During a financial crisis hit hard by bank failures,the money supply:

Correct AnswerverifiedShow Answer

In the short run,expansionary monetary policy ________ real gross domestic product (GDP) ,________ unemployment,and ________ the price level.

Correct AnswerverifiedShow Answer

Contractionary monetary policy ________ interest rates,causing ________ to shift to the ________.

Correct AnswerverifiedShow Answer

According to the Fisher equation,if a bank extends a loan for 3% and the inflation rate ends up being 2%,the:

Correct AnswerverifiedShow Answer

Economists who discount the short-run expansionary effects of monetary policy focus on the problems of:

Correct AnswerverifiedShow Answer

Which of the following aggregate demand-aggregate supply models illustrates the short-run effects of contractionary monetary policy?

Correct AnswerverifiedShow Answer

Unexpected inflation harms workers and other resource suppliers who have ________ prices in the ________ run.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf high inflation was expected,the Feder...View AnswerShow Answer

When inflation is expected,the real effect on the economy is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Expansionary monetary policy occurs when...
View Answer

Correct Answer
verified

Correct Answer
verified
Quantitative easing is the targeted use ...
View Answer

Correct Answer
verified

Correct Answer
verified
Expansionary monetary policy should be s...
View Answer

Correct Answer
verified
Mainstream economists today agree that t...
View Answer

Correct Answer
verified

Correct Answer
verified

In the short run,expansionary monetary policy real gross domestic product (GDP) , unemployment,and the price level.

Correct Answer
verified

Contractionary monetary policy interest rates,causing to shift to the .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Unexpected inflation harms workers and other resource suppliers who have prices in the run.

Correct Answer
verified

Correct Answer
verified
If high inflation was expected,the Feder...
View Answer

Correct Answer
verified