1. Which of the following is likely to happen if the Fed buys Treasury securities from banks?
interest rate rises; investment falls
interest rate rises; investment rises
interest rate falls; investment rises
interest rate falls; investment falls
2. The main goal of monetary policy is to shift
AD.
SRAS.
LRAS.
both AD and SRAS.
both AD and LRAS.
3. Which of the following is true regarding the effects of an expansionary monetary policy?
Printing more money will affect real GDP only in the short run because all prices do not adjust fully in the short run.
Printing more money will affect real GDP both in the short and long run because inflation is a natural occurrence of expansionary monetary policy.
Printing more money will not lower the value of money in the short run because prices are fully flexible in the short run.
Printing more money will ultimately raise the value of money in the long run because prices are fully flexible in the long run.
4. In which of the following cases are you likely to be adversely affected by unexpected inflation?
You, the owner of a local restaurant, charge the price of lamb lasagna as per the daily market rate of lamb.
You purchase Mountain Dew every day from the dormitory vending machine, which keeps its prices fixed for the entire school year.
You, the owner of an airline company, sign a two-year contract for airline fuel.
You deposit $10,000 in a bank account for 5 years for a fixed interest rate of 1%.
5. The Phillips curve depicts the relation between
real GDP and price level.
price level and inflation rate.
unemployment rate and inflation rate.
unemployment rate and real GDP.
6. Which of the following statements is true regarding the shapes of short-run and long-run Phillips curves?
The short-run Phillips curve is vertical and the long-run Phillips curve is downward sloping.
The short-run Phillips curve is downward sloping and the long-run Phillips curve is vertical.
Both the short-run and long-run Phillips curves are downward sloping.
Both the short-run and long-run Phillips curves are vertical.
7. Suppose the table below lists the actual annual inflation rates for 2010 to 2015. What would be the most likely predictions people make about the inflation rate for 2016 based on adaptive and rational expectations theories, respectively?
Year
Actual Inflation rate
2010
0%
2011
0%
2012
3%
2013
3%
2014
6%
2015
6%
6% and 3%
6% and 9%
6% and 12%
9% and 6%
3% and 6%
8. Which of the following can change relatively quickly in the short-run?
the price of a latte in a coffee shop
the salary of a finance professor
the rent paid for a store
1. Which of the following is likely to happen if the Fed buys Treasury securities from banks?
| interest rate rises; investment falls |
| interest rate rises; investment rises |
| interest rate falls; investment rises |
| interest rate falls; investment falls |
2. The main goal of monetary policy is to shift
| AD. |
| SRAS. |
| LRAS. |
| both AD and SRAS. |
| both AD and LRAS. |
3. Which of the following is true regarding the effects of an expansionary monetary policy?
| Printing more money will affect real GDP only in the short run because all prices do not adjust fully in the short run. |
| Printing more money will affect real GDP both in the short and long run because inflation is a natural occurrence of expansionary monetary policy. |
| Printing more money will not lower the value of money in the short run because prices are fully flexible in the short run. |
| Printing more money will ultimately raise the value of money in the long run because prices are fully flexible in the long run. |
4. In which of the following cases are you likely to be adversely affected by unexpected inflation?
| You, the owner of a local restaurant, charge the price of lamb lasagna as per the daily market rate of lamb. |
| You purchase Mountain Dew every day from the dormitory vending machine, which keeps its prices fixed for the entire school year. |
| You, the owner of an airline company, sign a two-year contract for airline fuel. |
| You deposit $10,000 in a bank account for 5 years for a fixed interest rate of 1%. |
5. The Phillips curve depicts the relation between
| real GDP and price level. |
| price level and inflation rate. |
| unemployment rate and inflation rate. |
| unemployment rate and real GDP. |
6. Which of the following statements is true regarding the shapes of short-run and long-run Phillips curves?
| The short-run Phillips curve is vertical and the long-run Phillips curve is downward sloping. |
| The short-run Phillips curve is downward sloping and the long-run Phillips curve is vertical. |
| Both the short-run and long-run Phillips curves are downward sloping. |
| Both the short-run and long-run Phillips curves are vertical. |
7. Suppose the table below lists the actual annual inflation rates for 2010 to 2015. What would be the most likely predictions people make about the inflation rate for 2016 based on adaptive and rational expectations theories, respectively?
| Year | Actual Inflation rate |
| 2010 | 0% |
| 2011 | 0% |
| 2012 | 3% |
| 2013 | 3% |
| 2014 | 6% |
| 2015 | 6% |
| 6% and 3% |
| 6% and 9% |
| 6% and 12% |
| 9% and 6% |
| 3% and 6% |
8. Which of the following can change relatively quickly in the short-run?
| the price of a latte in a coffee shop |
| the salary of a finance professor |
| the rent paid for a store |
