Question 1

Which of the following would be expected to increase the demand for money in the U.S.?

Accepted Answer

A)   Financial investors become concerned about increasing riskiness of stocks.
B)   The economy enters a recession.
C)   Political instability decreases dramatically in developing nations.
D)   On-line banking allows customers to transfer funds between checking and stock mutual funds 24 hours a day.E) A) and C)
F) B) and D)

Question 2

In the short-run, if the Federal Reserve increases interest rates, then consumption and investment ______, planned aggregate expenditure ______, and short-run equilibrium output _______.

Accepted Answer

A)   increase; increases; increases
B)   increase; increases decreases
C)   increase; decreases; decreases
D)   decrease; decreases; decreasesE) C) and D)
F) None of the above

Question 3

The Federal Reserve consists of ______ regional Banks, ______ governors on the Board of Governors, and ______ voting members of the Federal Open Market Committee.

Accepted Answer

A)   7; 12; 12
B)   12; 7; 12
C)   12; 7; 19
D)   14; 7; 21E) A) and C)
F) None of the above

Question 4

If commercial banks are maintaining a 4 percent reserve/deposit ratio and the Fed raises the required reserve ratio to 6 percent, then banks will ______ their loans and deposits, and the money supply will _____.

Accepted Answer

A)   increase; increase
B)   increase; decrease
C)   decrease; increase
D)   decrease; decreaseE) B) and D)
F) All of the above

Question 5

Financial markets pay close attention to changes in the federal funds rate because these changes:

Accepted Answer

A)   directly affect a large volume of loans.
B)   indicate the Fed's plans for monetary policy.
C)   indicate commercial bank lending policies.
D)   directly affect the interest payments on the national debt.E) B) and D)
F) C) and D)

Question 6

The Board of Governors consists of ______ governors appointed for staggered ___-year terms.

Accepted Answer

A)   5; 12
B)   5; 14
C)   7; 12
D)   7; 14E) B) and C)
F) A) and B)

Question 7

Lower real income ______ the demand for money and a lower price level ______ the demand for money.

Accepted Answer

A)   increases; increases
B)   increases; decreases
C)   increases; does not change
D)   decreases; decreasesE) All of the above
F) A) and B)

Question 8

A lower real interest rate ______ saving and ______ consumption spending.

Accepted Answer

A)   increases; increases
B)   increases; decreases
C)   does not change; does not change
D)   decreases; increasesE) C) and D)
F) A) and B)

Question 9

If the Federal Reserve wants to decrease the money supply, it should:

Accepted Answer

A)   decrease reserve requirements.
B)   decrease the discount rate.
C)   decrease the interest that it pays on reserves.
D)   conduct open-market sales.E) C) and D)
F) B) and D)

Question 10

The money demand curve will shift to the right if:

Accepted Answer

A)   the nominal interest rate increases.
B)   real income increases.
C)   ATM machines are introduced.
D)   the price level decreases.E) C) and D)
F) A) and C)

Question 11

Prior to January 2000, the demand for money increased as people anticipated Y2K problems. To offset this increase in money demand, the Fed would have had to ______ the money supply, which would have put ______ pressure on nominal interest rates.

Accepted Answer

A)   increase; downward
B)   increase; upward
C)   decrease; downward
D)   decrease; upwardE) None of the above
F) A) and B)

Question 12

In a certain economy, the components of planned spending are given by: C = 500 + 0.8(Y - T)  - 300r
Ip = 200 - 400r
G = 200
NX = 10
T = 150
Given the information about the economy above, what would be the impact on short-run equilibrium output of a one-percentage-point increase in the real interest rate, assuming that the multiplier is equal to 5?

Accepted Answer

A)   Short-run equilibrium output would increase by 35 units.
B)   Short-run equilibrium output would decrease by 700 units.
C)   Short-run equilibrium output would decrease by 35 units.
D)   Short-run equilibrium output would decrease by 7 units.E) None of the above
F) A) and B)

Question 13

If potential output equals 8,000 and short-run equilibrium output equals 8,500, there is a(n)  ______ gap and the Federal Reserve must ______ real interest rates in order to close the gap.

Accepted Answer

A)   recessionary; raise
B)   recessionary reduce
C)   recessionary; not change
D)   expansionary; raiseE) B) and C)
F) A) and D)

Question 14

The money demand curve will shift to the right if:

Accepted Answer

A)   the nominal interest rate increases.
B)   the nominal interest rate decreases.
C)   the price level increases.
D)   the price level decreases.E) A) and C)
F) C) and D)

Question 15

Prior to January 2000, the demand for money increased as people anticipated Y2K problems. If the Fed took no actions to offset this increase in money demand, then nominal interest rates would _____.

Accepted Answer

A)   increase
B)   decrease
C)   remain constant
D)   equal the real interest ratesE) B) and C)
F) A) and B)

Question 16

When commercial banks borrow reserves from the Fed, the quantity of reserves in the banking system ______ and, ultimately, the money supply _____.

Accepted Answer

A)   increases; increases
B)   increases; decreases
C)   decreases; increases
D)   decreases; decreasesE) None of the above
F) B) and D)

Question 17

Which of the following would be expected to increase the demand for U.S. currency?

Accepted Answer

A)   Competition among brokers forces down the commission charge for selling bonds or stocks.
B)   The economy enters a recession.
C)   Political instability increases dramatically in developing nations.
D)   On-line banking allows customers to transfer funds between checking and stock mutual funds 24 hours a day.E) A) and B)
F) All of the above

Question 18

One of the serious drawbacks of the deposit insurance system instituted in the United States is that:

Accepted Answer

A)   bank failures continue to occur regularly.
B)   the system took away the Federal Reserve's ability to conduct open-market operations.
C)   the system took away the Federal Reserve's ability to change reserve requirements.
D)   if insured intermediaries make bad loans, the taxpayers may be responsible for covering the losses.E) A) and D)
F) None of the above

Question 19

For the past 40 years, the Federal Reserve has expressed policy in terms of a target value for:

Accepted Answer

A)   bank reserves.
B)   the Federal Reserve discount rate.
C)   the federal funds rate.
D)   open market operations.E) A) and D)
F) B) and C)

Question 20

The Federal Reserve System first began operations in:

Accepted Answer

A)   1789.
B)   1865.
C)   1914.
D)   1934.E) A) and B)
F) B) and C)

Exam 12: Short-Term Economics Fluctuations: An Introduction

When commercial banks borrow reserves from the Fed, the quantity of reserves in the banking system __ and, ultimately, the money supply _.

Correct Answer
verified

If potential output equals 8,000 and short-run equilibrium output equals 8,500, there is a(n) gap and the Federal Reserve must real interest rates in order to close the gap.

Correct Answer
verified

Correct Answer
verified

One of the serious drawbacks of the deposit insurance system instituted in the United States is that:

Correct Answer
verified

Which of the following would be expected to increase the demand for money in the U.S.?

Correct Answer
verified

If the Federal Reserve wants to decrease the money supply, it should:

Correct Answer
verified

The money demand curve will shift to the right if:

Correct Answer
verified

The Board of Governors consists of ____ governors appointed for staggered _-year terms.

Correct Answer
verified

Which of the following would be expected to increase the demand for U.S. currency?

Correct Answer
verified

A lower real interest rate saving and consumption spending.

Correct Answer
verified

The Federal Reserve consists of regional Banks, governors on the Board of Governors, and __ voting members of the Federal Open Market Committee.

Correct Answer
verified

The money demand curve will shift to the right if:

Correct Answer
verified

Prior to January 2000, the demand for money increased as people anticipated Y2K problems. If the Fed took no actions to offset this increase in money demand, then nominal interest rates would _____.

Correct Answer
verified

If commercial banks are maintaining a 4 percent reserve/deposit ratio and the Fed raises the required reserve ratio to 6 percent, then banks will __ their loans and deposits, and the money supply will _.

Correct Answer
verified

The Federal Reserve System first began operations in:

Correct Answer
verified

Financial markets pay close attention to changes in the federal funds rate because these changes:

Correct Answer
verified

In the short-run, if the Federal Reserve increases interest rates, then consumption and investment , planned aggregate expenditure , and short-run equilibrium output ___.

Correct Answer
verified

For the past 40 years, the Federal Reserve has expressed policy in terms of a target value for:

Correct Answer
verified

Prior to January 2000, the demand for money increased as people anticipated Y2K problems. To offset this increase in money demand, the Fed would have had to the money supply, which would have put pressure on nominal interest rates.

Correct Answer
verified

Lower real income the demand for money and a lower price level the demand for money.

Correct Answer
verified

Exam 12: Short-Term Economics Fluctuations: An Introduction

When commercial banks borrow reserves from the Fed, the quantity of reserves in the banking system ______ and, ultimately, the money supply _____.

Correct AnswerverifiedShow Answer

If potential output equals 8,000 and short-run equilibrium output equals 8,500, there is a(n) ______ gap and the Federal Reserve must ______ real interest rates in order to close the gap.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One of the serious drawbacks of the deposit insurance system instituted in the United States is that:

Correct AnswerverifiedShow Answer

Which of the following would be expected to increase the demand for money in the U.S.?

Correct AnswerverifiedShow Answer

If the Federal Reserve wants to decrease the money supply, it should:

Correct AnswerverifiedShow Answer

The money demand curve will shift to the right if:

Correct AnswerverifiedShow Answer

The Board of Governors consists of ______ governors appointed for staggered ___-year terms.

Correct AnswerverifiedShow Answer

Which of the following would be expected to increase the demand for U.S. currency?

Correct AnswerverifiedShow Answer

A lower real interest rate ______ saving and ______ consumption spending.

Correct AnswerverifiedShow Answer

The Federal Reserve consists of ______ regional Banks, ______ governors on the Board of Governors, and ______ voting members of the Federal Open Market Committee.

Correct AnswerverifiedShow Answer

The money demand curve will shift to the right if:

Correct AnswerverifiedShow Answer

Prior to January 2000, the demand for money increased as people anticipated Y2K problems. If the Fed took no actions to offset this increase in money demand, then nominal interest rates would _____.

Correct AnswerverifiedShow Answer

If commercial banks are maintaining a 4 percent reserve/deposit ratio and the Fed raises the required reserve ratio to 6 percent, then banks will ______ their loans and deposits, and the money supply will _____.

Correct AnswerverifiedShow Answer

The Federal Reserve System first began operations in:

Correct AnswerverifiedShow Answer

Financial markets pay close attention to changes in the federal funds rate because these changes:

Correct AnswerverifiedShow Answer

In the short-run, if the Federal Reserve increases interest rates, then consumption and investment ______, planned aggregate expenditure ______, and short-run equilibrium output _______.

Correct AnswerverifiedShow Answer

For the past 40 years, the Federal Reserve has expressed policy in terms of a target value for:

Correct AnswerverifiedShow Answer

Prior to January 2000, the demand for money increased as people anticipated Y2K problems. To offset this increase in money demand, the Fed would have had to ______ the money supply, which would have put ______ pressure on nominal interest rates.

Correct AnswerverifiedShow Answer

Lower real income ______ the demand for money and a lower price level ______ the demand for money.

Correct AnswerverifiedShow Answer

When commercial banks borrow reserves from the Fed, the quantity of reserves in the banking system __ and, ultimately, the money supply _.

Correct Answer
verified

If potential output equals 8,000 and short-run equilibrium output equals 8,500, there is a(n) gap and the Federal Reserve must real interest rates in order to close the gap.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The Board of Governors consists of ____ governors appointed for staggered _-year terms.

Correct Answer
verified

Correct Answer
verified

A lower real interest rate saving and consumption spending.

Correct Answer
verified

The Federal Reserve consists of regional Banks, governors on the Board of Governors, and __ voting members of the Federal Open Market Committee.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If commercial banks are maintaining a 4 percent reserve/deposit ratio and the Fed raises the required reserve ratio to 6 percent, then banks will __ their loans and deposits, and the money supply will _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In the short-run, if the Federal Reserve increases interest rates, then consumption and investment , planned aggregate expenditure , and short-run equilibrium output ___.

Correct Answer
verified

Correct Answer
verified

Prior to January 2000, the demand for money increased as people anticipated Y2K problems. To offset this increase in money demand, the Fed would have had to the money supply, which would have put pressure on nominal interest rates.

Correct Answer
verified

Lower real income the demand for money and a lower price level the demand for money.

Correct Answer
verified