Question 1
1 / 1 pts
The monetary base is defined as
all deposits at the Fed.
bank reserves minus vault cash.
deposits at the Fed plus vault cash.
bank reserves plus currency held by the nonbank public.
Question 2
1 / 1 pts
Banks hold some deposits on reserve at the Fed because
the Fed will insure those deposits, but will not insure regular bank deposits.
these are membership dues for being a member bank.
the Fed requires every bank to hold at least $100 million on deposit at all times.
these deposits meet the reserve requirements of the Fed.
Question 3
1 / 1 pts
Changes in reserve requirements directly and immediately affect
banks' holdings of securities.
the Fed's holdings of foreign exchange.
the money multiplier.
the monetary base.
Question 4
1 / 1 pts
The largest asset of the Fed from those on this list is
currency outstanding.
U.S. Treasury securities.
loans to depository institutions.
mortgage-backed securities.
Question 5
1 / 1 pts
The Fed's tools are also known as
instruments.
derivatives.
goals.
intermediate targets.
Question 6
1 / 1 pts
In the Keynesian model, suppose the Fed wants to keep output unchanged. If
the IS curve shifts to the left, and the Fed acts to keep output unchanged, then
taxes will increase.
the real interest rate will decrease.
taxes will decrease.
the money supply will decline.
Question 7
1 / 1 pts
In the Keynesian model, suppose the Fed sets a target for the real interest rate. If
the IS curve shifts up and to the right, and the Fed wants to keep output unchanged in
the short run and the price level unchanged in the long run, it will
shift the LR curve down.
shift the IS curve up and to the right.
shift the LR curve up.
not shift the LR curve.
Question 8
1 / 1 pts
In the Keynesian model, suppose the Fed sets a target for the money supply. If
the IS curve shifts to the left, and the Fed wants to keep output unchanged, what should
the Fed do?
Increase the money supply.
Increase taxes.
Reduce taxes.
Reduce the money supply.
Question 9
1 / 1 pts
A liquidity trap occurs when
the demand for loans increases in a country on the gold standard, so that the monetary
supply is not able to increase and interest rates rise dramatically.
the Fed increases the money supply, causing the expected inflation rate to rise more
than the real interest rate declines, so that the nominal interest rate increases.
any additions to the monetary base are held as cash by people or reserves at banks.
there are runs on banks that are solvent but illiquid.
Question 10
1 / 1 pts
In response to an unanticipated easing of monetary policy, the Fed funds rate ________
at first, then ________ after 6 to 12 months.
rises; returns most of the way to its original value
falls; returns most of the way to its original value
remains roughly unchanged; rises significantly
remains roughly unchanged; falls significantly
Question 11
1 / 1 pts
In response to an unanticipated easing of monetary policy, output ________ at first,
then ________ after about four months.
rises; returns most of the way to its original value
falls; returns most of the way to its original value
remains roughly unchanged; rises significantly
remains roughly unchanged; falls significantly
Question 12
1 / 1 pts
According to the Taylor rule, if output is above its full-employment level and inflation is
less than 2%
the Fed should raise the Fed funds rate above 4%.
the Fed should reduce the Fed funds rate below 4%.
what the Fed should do is ambiguous.
the Fed should make the Fed funds rate exactly 4%.
Question 13
1 / 1 pts
Based on the Taylor rule, in the 1980s, monetary policy was
just about right.
too easy.
too tight in the first half of the decade and too easy in the second half.
too tight.
Question 14
1 / 1 pts
The degree to which the public believes the central bank's announcements about future
policy is its
transparency.
reputation.
openness.
credibility.
Question 15
1 / 1 pts
The primary criticism by Keynesians of the credibility argument for rules is that
reputations are a less costly method of maintaining credibility.
rules that reduce presidential and congressional influence over monetary policy could
ultimately be harmful to the economy.
reputations are a less costly method of gaining credibility.
the cost of losing flexibility over policy choices may exceed the cost of gaining
credibility.
Question 16
1 / 1 pts
Which of the following statements would Milton Friedman agree with concerning the
conduct of monetary policy?
Wage and price adjustments are relatively slow, so changing the money supply will
have a minimal impact on the real economy.
There are long and variable lags between monetary policy actions and their economic
results.
There is little uncertainty over the effect of a change in the money supply on the
economy.
Information lags are short, enabling the central bank to respond quickly to changes in
the economy.
Question 17
1 / 1 pts
When the central bank announces the inflation rate that it will achieve over the next one
to four years, it is following a strategy known as
real business cycle targeting.
money targeting.
a currency board.
inflation targeting.
Question 18
1 / 1 pts
Monetarists suggest doing which of the following?
Use monetary policy to combat unemployment in the long run.
Use fiscal policy to combat unemployment in the short run.
Use fiscal policy to combat inflation in the long run.
Maintain a steady growth rate of the money supply.
Question 19
1 / 1 pts
The basic Keynesian argument for discretionary monetary policy is that
aggregate demand is unstable and monetary policy can help to stabilize it.
monetary policy is the principal cause of business cycles.
monetary policy is much more effective than fiscal policy.
reducing unemployment is much more important than reducing inflation.
Question 20
1 / 1 pts
According to the Taylor rule, if inflation in the last year was 6% and output was 2%
below its full-employment level, the nominal Fed funds rate should be
7%.
3%.
5%.
9%.
Quiz Score: 20 out of 20