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Exam 27: Monetary Policy

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Question 61

Multiple Choice

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In the short run, the interest rate is determined in the _____ market.

A) stock
B) money
C) loanable funds
D) commodity

E) C) and D)
F) A) and B)

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Question 62

True/False

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In the long run changes in the money supply change prices but not real output and interest rates.

A) True
B) False

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Question 63

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Use the following to answer questions Figure: Monetary Policy III -(Figure: Monetary Policy III) Look at the figure Monetary Policy III. Expansionary monetary policy will lead to an equilibrium price level of:

If the economy is in a recessionary gap, the Federal Reserve should conduct _____ monetary policy by _____ the money supply.

Use the following to answer question Figure: Short-Run and Long-Run Effects of Monetary Policy -(Figure: Short-Run and Long-Run Effects of Monetary Policy) Look at the figure Short-Run and Long-Run Effects of Monetary Policy. If the economy is initially at E₂ and the central bank makes no change in its monetary policy:

Which of the following statements is FALSE? In the long run, monetary policy:

When long-term interest rates are higher than short-term rates, as they were in 2010:

A rise in interest rates due to a decrease in the money supply will _____ aggregate demand.

Use the following to answer questions Scenario: Money and Interest Rates Banks decide to do away with fees charged when other banks' customers use the bank's own ATM. -(Scenario: Money and Interest Rates) Look at the scenario Money and Interest Rates. If the Federal Reserve wants to maintain the same federal funds rate, it should:

Use the following to answer questions Figure: Monetary Policy and the AD-SRAS Model -(Figure: Monetary Policy and the AD-SRAS Model) Look at the figure Monetary Policy and the AD-SRAS Model. If the economy is at point h because of an open market purchase by the Federal Reserve and no further monetary policy is implemented, in the LONG run nominal wages will _____, SRAS will shift _____, real GDP will _____, and the price level will _____.

People pay a cost for holding money instead of nonmonetary assets such as Treasury bills.

Use the following to answer questions Figure: Monetary Policy III -(Figure: Monetary Policy III) Look at the figure Monetary Policy III. Expansionary economic policy will lead to an equilibrium GDP of:

Improvements in information technology have:

The liquidity preference model focuses on interest rates in the short run.

When the Fed changes tax rates, interest rates change, and this changes real GDP.

The higher the short-term interest rate, the lower the opportunity cost of holding money.

If the demand for money is $300 billion and the supply of money is $200 billion, then the interest rate will:

Which of the following monetary policies would be destabilizing? I. an expansionary policy during an expansion II) an expansionary policy during a recession III) a contractionary policy during an expansion

Expansionary monetary policy works by decreasing consumption, allowing other sectors of the economy to spend more.

Expansionary monetary policy _____ the money supply, _____ interest rates, and _____ consumption and investment spending.