Macro Chap 16

The Federal Reserve System regulates the money supply primarily by:

An expansionary monetary policy is one that reduces the supply of money.

Reserves borrowed at the federal funds rate are usually repaid:

The impact of monetary policy on investment spending may be weakened:

Other things equal, an expansionary monetary policy will shift the economy's aggregate demand curve to the right.

A decrease in the reserve ratio increases the:

In an effort to stabilize the banking sector and keep banks lending, from October 2008 to September 2009, the Fed:

The asset demand for money varies inversely with the nominal GDP.

Other things equal, a restrictive monetary policy during a period of demand-pull inflation will:

Answer the question on the basis of the following consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 20 percent. All figures are in billions and each question should be answered independently of changes specified in all preceding ones. Refer to the given data. Suppose the Fed wants to increase the money supply by $1,000 billion to drive down interest rates and stimulate the economy. To accomplish this, it could lower the reserve requirement from 20 percent to:

Which of the following is a primary difference between QE2 and QE3?

One of the strengths of monetary policy relative to fiscal policy is that monetary policy:

Which of the following actions by the Fed would cause the money supply to increase?

Assume that the price level is flexible both upward and downward and that the Fed's policy is to keep the price level from either rising or falling. If aggregate supply increases in the economy, the Fed:

Assume that the commercial banking system has checkable deposits of $10 billion and excess reserves of $1 billion at a time when the reserve requirement is 20 percent. If the reserve requirement is now raised to 30 percent, the banking system then has:

Suppose the Federal Reserve Banks sell $2 billion of government bonds to the public, which pays for them by drawing checks. As a result, commercial bank reserves will:

The opportunity cost of holding money:

Other things equal, which of the following would increase the federal funds rate?

Refer to the diagram of the market for money. The vertical money supply curve Sm reflects the fact that:

If the amount of money demanded exceeds the amount supplied, the:

Refer to the given market-for-money diagrams. Curve D1 represents the:

Answer the question on the basis of the following consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 20 percent. All figures are in billions and each question should be answered independently of changes specified in all preceding ones. Refer to the given data. If the Fed increased the reserve requirement from 20 percent to 25 percent, a deficiency of reserves in the commercial banking system of _____ would occur and the monetary multiplier would fall to ____.

If the Fed were to reduce the legal reserve ratio, we would expect:

Operation Twist was aimed at lowering long-term interest rates.

The current (2013) chairperson of the Board of Governors of the Federal Reserve System is:

Assuming government wishes to either increase or decrease the level of aggregate demand, which of the following pairs are not consistent policy measures?

A federal funds rate reduction that is caused by monetary policy will:

Which of the following tools of monetary policy is flexible and able to affect bank reserves quickly and by relatively specific amounts?

Other things equal, if there is an increase in nominal GDP:

According to the Taylor rule:

If the Federal Reserve System buys government securities from commercial banks and the public:

Other things equal, a reduction in income taxes would:

Refer to the diagram of the market for money. The downward slope of the money demand curve Dm is best explained in terms of the:

An increase in the money supply will:

From September 2007 to April 2008 the Fed lowered the federal funds rate from 5.25 percent to 2 percent in a series of steps. The Fed's actions were largely in response to:

Refer to the diagram of the market for money. Other things equal, the money demand curve in the diagram would shift leftward if:

To increase the federal funds rate, the Fed can:

Suppose the demand for money and the supply of money increase simultaneously. We can:

Refer to the table. An interest rate of 2 percent is not sustainable because:

Forward commitment by the Fed:

In the cause-effect chain linking changes in the banks' excess reserves and the resulting changes in output and employment in the economy:

Refer to the table above. Suppose that the transactions demand for money is equal to 20 percent of the nominal GDP, the supply of money is $800 billion, and the asset demand for money is that shown in the table. If the nominal GDP is $2000 billion, the equilibrium interest rate is:

The Federal Reserve can increase aggregate demand by:

If the Fed is targeting a lower federal funds rate, then it is pursuing a restrictive monetary policy.

If the Fed reduces the interest paid on banks' reserves, it is trying to make banks hold:

Refer to the graphs above, in which the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the level of investment spending associated with each curve. All figures are in billions. The economy is at point Z on the investment demand curve. Given these conditions, what policy should the monetary authorities pursue to achieve a noninflationary full-employment level of real GDP?

If the Fed seeks to maintain a fixed targeted interest rate, then it will have to increase the money supply when the demand for money increases as income increases.

Refer to the graphs above, in which the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the level of investment spending associated with each curve. All figures are in billions. The interest rate in the economy is 4 percent. What should the Fed do to achieve a noninflationary full-employment level of real GDP?

Refer to the table above. Suppose that the transactions demand for money is $300 billion and the money supply is $700 billion. A decrease in the money supply to $600 billion would cause the interest rate to:

Among the worrisome consequences of the government's aggressive implementation of ZIRP and QE are the following, except:

A newspaper headline reads: "Fed Cuts Federal Funds Rate for Fifth Time This Year." This headline indicates that the Federal Reserve is most likely trying to:

The effects of expansionary monetary policy are strengthened by a liquidity trap.

There is an asset demand for money because households and business firms use money as a store of value.

Holding money as an asset presents a risk of capital loss.

Raising the interest paid on reserves has the effect of making it:

The reserves of commercial banks are assets to commercial banks and liabilities of the Federal Reserve System.

Refer to the graph above, in which Dt is the transactions demand for money, Dm is the total demand for money, and Sm is the supply of money. The market is initially in equilibrium at a 6 percent interest rate. If the money supply increases, then Sm2 will shift to:

The major advantages of monetary policy include its flexibility, speed, and political palatability.

Other things equal, an appreciation of the U.S. dollar would:

Which line in the graph above would best illustrate the transactions demand for money curve?

Other things equal, an increase in consumer wealth will:

Which line in the graph above would best illustrate the asset demand for money curve?

Refer to the figure above. If demand for overnight funds in the graph should increase by $50 billion at each and every point on the demand curve, but the Federal Reserve wants to keep the target rate at 5.0 percent, what will be the new equilibrium quantity of reserves?

Assume that the required reserve ratio is 20 percent. If the Federal Reserve buys $80 million in government securities from commercial banks, then the money supply will immediately:

Suppose the economy is at full employment with a high inflation rate. Which combination of government policies is most likely to reduce the inflation rate?

Assume that there is a 25 percent reserve ratio and that the Federal Reserve buys $200 million worth of government securities. If the securities are purchased from the public, then this action has the potential to increase bank lending by a maximum of:

Assume that the stock of money is determined by the Federal Reserve and does not change when the interest rate changes. This situation means that the:

A television report states: "The Federal Reserve will lower the discount rate for the fourth time this year." This report indicates that the Federal Reserve is most likely trying to:

If the Fed wants to maintain current interest rates, it would be buying government bonds in the open market when:

If the Federal funds rate:

In the cause-effect chain of monetary policy an autonomous increase in investment spending when the economy is at full employment will cause the Fed to seek a lower target for the federal funds rate by buying securities in the open market.

An increase in the money supply is likely to reduce:

The purchase and sale of government securities by the Fed is called:

A bond with no expiration date is priced at $10,000 when the interest rate in the economy is 6%. If the interest rate falls to 5.5%, then this bond's price would decrease.

In the balance sheet above for the Federal Reserve, the assets would be items 5 and:

An increase in nominal GDP will:

Which of the following is a monetary policy intended to rein in inflation?

Monetary policy, unlike fiscal policy, does not have any time lags.

The transactions demand for money is least likely to be a function of the:

The Fed can induce banks to increase their reserve holdings by: