ECON204 3

1.

1 point

If banks are low on reserves, the can borrow directly from the FED at

discount rates

2.

1 point

the supply shocks charactersistics; what is the best one (none of these)?

leftward shift of AS, generate stagflation, results from any negative external shock; shift AS right

3.

1 point

What is the principal mechanism for monetary policy

open-market mechanism

4.

1 point

The federal funds rate is the interest rate charged when

One bank lends to another bank

The Fed lends to banks

The Fed lends to individuals

Individual banks lend to the Fed

5.

1 point

Stagflation is

The simultaneous occurrence of substantial unemployment and inflation.

6.

1 point

the market demand for money is

downward sloping

7.

1 point

Three reasons why we hold money

trasnactions, precautionary, and speculative demand

8.

1 point

By changing the discount rate, the FED changes what?

the cost of money for banks - changes the incentives to borrow reserves

9.

1 point

What four functions does the FED perform?

clearing checks between private banks, holding bank reserves, providing currency, providing loans

10.

1 point

What two things does open-market sales decrease? What one thing does it increase?

It decreases money supply and bank reserves when people buy bonds using their account balances; increases interest rate

11.

1 point

What three things increase if RRR decreases?

excess reserves, money multiplier, and lending capacity of banking system

12.

1 point

5 monetary policy restraints

long-term interest rates don't reflect short term interest rates, liquidity trap, low expectations, and time lags

13.

1 point

Which of the following is NOT an example of positive supply-side policy?

Higher marginal tax rates

Eliminating excessive government regulation

Improving infrastructure

Trade liberalization

14.

1 point

stagnation is

falling output/rising unemployment

15.

1 point

An attempt to lower unemployment with demand-side stimulus policies will cause in increase in the price level, which is illustrated by

A leftward shift of the Philips curve

A leftward shift of the aggregate demand curve

A rightward shift of the aggregate supply curve

A rightward shift of the aggregate demand curve

16.

1 point

how many regional FED banks are there?

12

17.

1 point

Monetary stimulus

FED buys bonds --> increase MS, decrease interest rate, increase investment, increase AD

18.

1 point

Which of the following shifts, ceteris paribus, will cause lower rates of both unemployment and inflation?

In increase in aggregate demand

An increase in aggregate supply

A decrease in aggregate demand

A decrease in aggregate supply

19.

1 point

the Philips curve is

the short-run trade off between unemployment rates and inflation rates

20.

1 point

What two things does open-market purchases increase; what on thing does it decrease?

increases money supply and bank reserves when people sell bonds to the FED and deposit proceeds in banks; decreases interest rates

21.

1 point

The fed can use all of the following except _____ to change the lending capacity of the banking system

the excess reserve ratio

22.

1 point

Regarding interest rates, what do they do to cause a liquidity trap?

They don't fall when the FED wants them to

23.

1 point

two causes of low expectations

firms may not respond to lower interest rates that the FED provides; no change in investment even when interest rates change

24.

1 point

What is the monetary policy unable to do, which causes liquidity trap?

unable to reduce interest rates to stimulate investment

25.

1 point

By raising and lowering the discount rate, the Fed changes the

Level of required reserves held by individuals

Incentive for banks to buy common stock

Incentive for banks to borrow reserves

Money multiplier

26.

1 point

Rightward AS shifts will cause

Leftward Philips curve shifts

Rightward Philips curve shifts

Movements up and to the left along the existing Philips curve

Movements down and to the right along the existing Philips curve

27.

1 point

The rate of interest charged by Federal Reserve banks for lending reserves to member banks is the

Federal funds rate

Prime rate Prime rate

Discount rate

Commercial paper rate

28.

1 point

Philips curve is always ____-_____; the trade-off isn't always

downward sloping; set in stone

29.

1 point

What does the FED have to change to alter the lending capacity of the banking system?

required reserve ratio

30.

1 point

IF the aggregate supply curve shifts to the right, the _____ curve shifts to the _____

aggregate demand, left

Philips, left

aggregate demand, right

Philips, right

31.

1 point

Supply-side economists favor tax incentives that

Discourage saving and encourage spending

Discourage infrastructure development

Increase the level of government regulation

Encourage investment

32.

1 point

People may just hold onto what, which causes a liquidity trap?

money the FED supplies them

33.

1 point

Why is reserve requirements rarely used?

can cause large disruptions in banking activity

34.

1 point

According to the supply-side theory, which of the following would cause a leftward shift in the aggregate supply curve?

Increasing government regulations

Reducing the minimum wage

Reducing discrimination in employment

Eliminating excessive government regulation

35.

1 point

FED can increase bank reserves, but MS only grows if banks make loans, known as

reluctant leaders

36.

1 point

Which of the following is the principal mechanism used by the Federal Reserve to directly alter the reserves of the banking system?

Changes in the discount rate

Changes in the required reserve ratio

Open market operations

Foreign-exchange operations

37.

1 point

5 ways to shift AS right; what are they called?

tax incentives, human capital, deregulation, trade liberalization, infrastructure development; "supply-side" policies

38.

1 point

What are 3 monetary policy tools

reserve requirements, discount rate, and open-market operations

39.

1 point

equilibrium interest rate is determined

by the intersection on the money demand and supply curves

40.

1 point

the money supply curve is a _____ line and is determined by who?

vertical; the FED and banking system

41.

1 point

A movement along the Philips curve shows that the unemployment and inflation rate are

Inversely related to each other

Directly related to each other

Changing in response to shifts in aggregate supply

Changing in response to supply-side policy

42.

1 point

a rightward shift of AS can reduce what two things at the same time? what is the process? the Philips curve will always shift what in regards to the AS curve

unemployment and inflation; Philips curve shifts left, inflation and unemployment trade off eases; the opposite direction

43.

1 point

What is called when banks that are running low on reserves borrow from each other?

overnight loans

44.

1 point

The current chairman of the Federal Reserve is

Alan Greenspan

George W. Bush

Ben Bernanke

Nancy Pelosi

45.

1 point

Supply-side policies are designed to achieve a

Movement up the Philips curve to a higher inflation rate

Movement down the aggregate supply curve

Lower inflation rate but a higher unemployment rate

Lower inflation rate and a lower unemployment rate

46.

1 point

monetary restraint

FED sells bonds --> decrease MS, increase r, decrease I, decrease AD

47.

1 point

According to supply-side theorists, taxes

Alter disposable income only

Alter disposable income and affect the incentives to work only

Alter disposable income and affect the incentives to work and produce

None of the choices are correct

48.

1 point

lending bank charges interest from borrowing bank, also known as?

federal funds rate

49.

1 point

All of the following are tools available to the Fed for controlling the money supply except

The reserve requirement

The discount rate

Open market operations

Taxes

50.

1 point

there will always be what between interest rate changes and investment responses

time lags