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QUESTION 109

The Taylor rule is the official Fed policy.

True

False

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QUESTION 110

Demand-pull inflation is due to excessive spending on goods and services.

True

False

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QUESTION 111

In open market operations, the Federal Reserve buys and sells gold on the open market to preserve the value of the dollar.

True

False

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QUESTION 112

The most important tool of monetary policy is the discount rate.

True

False

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Kritika KrishnakumarLv10
28 Sep 2019
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Related questions

QUESTION 41

The consumer price index is intended to measure the cost of all goods purchased in the economy over time.

True

False

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QUESTION 42

When an economy has reached a zero unemployment rate, it is said to have reached full employment.

True

False

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QUESTION 43

The official unemployment rate is a useful but not altogether accurate measure of joblessness.

True

False

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QUESTION 44

The two types of reserves are federal reserves and required reserves.

True

False

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QUESTION 45

Automatic stabilizers, such as tax revenues and transfer payments, eliminate fluctuations in the business cycle.

True

False

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QUESTION 46

When the actual rate of unemployment is equal to the natural rate of unemployment, we conclude that there is no cyclical unemployment.

True

False

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QUESTION 47

Increased government regulation can cause the aggregate supply curve to shift to the left.

True

False

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QUESTION 48

The price index in the base year is normalized so that it equals 100.

True

False

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QUESTION 49

If the Federal Reserve wants to increase the money supply, it should raise the required reserve ratio.

True

False

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QUESTION 50

The aggregate supply curve in the long run is vertical because wages and other input prices respond completely to a change in price level.

True

False

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QUESTION 51

Public choice analysis helps us to understand why deficits seem inevitable, since we always pay the full costs of government programs today.

True

False

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QUESTION 52

Expansionary demand-side fiscal policies set up a tradeoff between increasing output at the expense of raising prices.

True

False

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QUESTION 53

Cathy works part-time as a bookkeeper but would like to have a full-time position. She has been actively searching for months but so far has not found a job. According to the Bureau of Labor Statistics, Cathy is unemployed.

True

False

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QUESTION 54

The real rate of interest is the nominal rate of interest times the inflation rate.

True

False

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QUESTION 55

The time required to comprehend that a recession has in fact begun is called the recognition lag.

True

False

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QUESTION 56

If an economy is in long-run equilibrium, it is also in short-run equilibrium.

True

False

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QUESTION 57

Policymakers can increase output by enacting policies that expand government spending, consumption, investment, or net exports or reduce taxes.

True

False

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QUESTION 58

When Disney builds a new amusement park in the United States, it is counted as part of GDP.

True

False

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QUESTION 59

The oil shock of 1973 led to demand-pull inflation.

True

False

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QUESTION 60

Casey is a 16-year-old high school student who has no marketable skills. He has been browsing the want-ads in the local newspaper for months but finally got so discouraged that he quit looking. According to the Bureau of Labor Statistics, Casey is unemployed.

True

False

1.  The Federal Funds Rate is set by the Federal Reserve on the first business day of each month by faxing the rate to the member banks of each Federal Reserve District.

A. True

B. False

 

2. The Federal Reserve is a single Central bank located on Wall Street in New York City.

A. True

B. False

 

3. Which of the following is NOT true about the Federal Reserve System?

A. Terms of service of the members of the Board of Governors are longer than the number of years that a two-term President of the United States would serve.

B. The Federal Reserve System is the nation's central bank and is comprised of 12 Federal Reserve Banks that serve as bankers' banks.

C. Some of the main functions of the Federal Reserve System include the authority to control the money supply, to issue currency, to set reserve requirements, and to hold reserves.

D. While Congress controls the actions of the Federal Reserve, the President has the authority to appoint and remove private banks from the Federal Reserve System.

 

4. Which of the following is NOT true about restrictive monetary policy?

A. A restrictive monetary policy seeks to raise the federal funds rate.

B. A restrictive monetary policy seeks to expand the money supply.

C. A restrictive monetary policy seeks to raise the Federal Funds Rate by selling government bonds or raising the reserve requirement ratio or increasing the discount rate.

D. A restrictive monetary policy is used when the government is concerned about suddenly increasing inflation.

 

5. Which of the following statements is NOT true about contractionary fiscal policy?

A. Contractionary fiscal policy consists of reductions in government spending or increases in taxes.

B. Contractionary fiscal policy can include both reductions in government spending or increases in taxes.

C. Contractionary fiscal policy seeks to shift the Aggregate Demand curve to the right.

D. Contractionary fiscal policy is used when the government seeks to reduce suddenly surging inflation.

 

6. The Federal Reserve creates money by printing the amount of desired new money and distributing it via armored trucks and high-security railways to Federal Reserve District Banks.

A. True

B. False

 

7. If the Fed feared a looming recession was just around the corner, which of the following actions would it "NOT" consider?

A. The Fed would raise the discount rate.

B. In order to influence prevailing commercial interest rates to fall, the Fed would buy large amounts of government securities.

C. In order to expand the money supply (which influences prevailing commercial interest rates to fall), the Fed would either buy large volumes of government bonds, lower the reserve requirement or cut the discount rate.

D. The Fed would seek to expand the money supply because, in so doing, the federal funds rate would fall and that would stimulate commercial interest rates to fall.

 

8. Which of the following statements is NOT true about the ability of the Federal Reserve System to expand the money supply?

A. The Federal Reserve System uses the fractional nature of the banking system to create money in order to expand the money supply.

B. The money multiplier defines the relationship between new excess reserves throughout the banking system and the creation of money by banks in the system. It is calculated by dividing the number 1 by the Required Reserve Ratio. [1/rr].

C. If the required reserve ratio is 20%, then $80 billion in new excess reserves will create $400 billion in bank system lending throughout the entire banking system.

D. If the reserve requirement is 100%, then the banks can generate 100% in new excess reserves.

 

9. Which of the following is NOT true about the tools of monetary policy?

A. The Fed can alter the money supply through open market operations, changes in the reserve ratio or adjustments to the discount rate.

B. Lowering the reserve ratio would expand the money supply.

C. Raising the discount rate would restrict the money supply.

D. Adjusting the reserve requirement is the most important day-to-day method for controlling the nation's money supply.

 

10. If the Federal Reserve wishes to hold off a feared recession, it will sell large volumes of government bonds.

A. True

B. False

Q1. The total resource cost of goods and services produced by the U. S. economy is known as
a. real GDP
b. personal income
c. national wealth
d. national income

Q2. The difference between GDP and final sales equals
a. depreciation
b. exports
c. imports
d. net inventory change

Q3. Current disposable income can be adjusted for price changes and population changes to yield real per capita disposable income.
a. true
b. false

Q4. If a lawn service mows your grass, it is included in the GDP.
a. true
b. false

Q5. In national income accounting, grain fed to a hog at a commercial hog farm is considered a(n)
a. final good
b. intermediate good
c. consumer good
d. capital consumption allowance

Q6. Imports constitute a minus figure in national income accounting.
a. true
b. false

Q7. The total value added in the production of a final good
a. exceeds the price of the final good
b. equals the price of the final good
c. exceeds the total payments made to owners of productive resources used in the production
d. both (b) and (c)

Q8. The GDP is reported on a monthly basis by the Department of Commerce.
a. true
b. false

Q9. Transfer payments are added to NI in the process of determining personal income.
a. true
b. false

Q10. U.S. gross domestic product is converted to U.S. gross national product by
a. adding the value of output produced by U.S.-owned resources in foreign countries
b. subtracting the value of output produced by U.S.-owned resources in foreign countries
c. subtracting the value of output produced in the United States by foreign-owned resources
d. both (a) and (c)

Q11. Final sales are always larger than the GDP.
a. true
b. false

Q12. Because of the value of things produced inside households, (building your own desk, mowing your own lawn, etc.)
a. the GDP value is automatically adjusted upward to reflect this
b. the GDP value is automatically adjusted downward to reflect this
c. Official GDP is surely smaller than true total output
d. Official GDP is surely larger than true total output

Q13. A government surplus may trigger a decline in the money supply.
a. true
b. false

Q14. Real wages are determined by multiplying money wages by the CPI.
a. true
b. false

Q15. The more volatile the inflation rate, the weaker the money supply as a standard of deferred payment.
a. true
b. false

Q16. An increase in the money supply always causes an increase in the price level.
a. true
b. false

Q17. Your nominal wages rose during the same period from $200 a week to $260. By how much did your real income rise?
a. 30 percent
b. 16.7 percent
c. 8.33 percent
d. 12 percent

Q18. In the past 10 years or so, average real wages of U.S. workers in nonagricultural industries have
a. increased about 40 percent
b. increased slightly
c. remained about the same
d. declined

Q19. If a new cash deposit creates excess reserves of $5,000 and the required reserve ratio is 10 percent, the banking system can increase the money supply by a maximum of
a. $50,000
b. $500
c. $5,000
d. $4,500

Q20. The effect of a change in the money supply on economic activity may be offset by a change in velocity.
a. true
b. false

Q21. The current base period for the CPI is
a. 1967
b. 1977
c. 1982–1984
d. 1990

Q22. In the circular flow, an increase in the money supply tends to result when
a. planned I equals planned S
b. planned I is less than planned S
c. planned I is greater than planned S
d. there is a surplus government budget

Q23. COLA is a form of indexation.
a. true
b. false

Q24. The total checkable deposits a bank may have can be determined by dividing its reserves by the reserve requirement.
a. true
b. false

Q25. The Financial Services Modernization Act
a. reinforced the Glass Steagall Act
b. prevented mergers of banks
c. eliminated barriers between banks, brokerage houses, and insurance companies
d. eliminated all banking regulations

Q26. Each Federal Reserve Bank has its own board of directors.
a. true
b. false

Q27. The most frequently used tool of U.S. monetary policy is
a. the discount rate
b. the reserve requirement
c. open-market operations
d. moral suasion

Q28. When the Fed conducts open-market operations, it primarily uses
a. Treasury bills
b. long-term U.S. government bonds
c. bonds of publicly traded corporations
d. overnight loans of major banks

Q29. The Board of Governors of the Federal Reserve System has
a. 6 members
b. 7 members
c. 1 member from each Federal Reserve Bank
d. 20 members

Q30. If the Fed desires to increase checkable deposits, it may lower the reserve requirement.
a. true
b. false

Q31. The interest rate at which banks borrow excess reserves from each other is known as the
a. prime rate
b. federal funds rate
c. discount rate
d. T-bill rate

Q32. If member banks need to borrow reserves, they must do so through the discount window.
a. true
b. false

Q33. The Fed Chairman appears before Congress semi-annually to present the Monetary Policy Report.
a. true
b. false

Q34. In terms of the total number of payments, which of the following comprises the largest share?
a. cash
b. personal checks
c. debit cards
d. credit cards

Q35. By buying government securities, the Federal Open Market Committee adds to member banks' reserves.
a. true
b. false

Q36. More than 50 percent of commercial banks in the United States belong to the Federal Reserve System.
a. true
b. false

Q37. The Federal Reserve System is built around
a. 4 regional banks
b. 6 regional banks
c. 12 district banks
d. 1 bank with several branches

Q38. The time lags lead monetarists to contend that monetary policy is counterproductive.
a. true
b. false

Q39. The marginal propensity to consume is
a. the fraction of an increase in income that would be spent on consumer goods
b. the additional desire people have for consumer goods
c. the fraction of a person's total income normally spent for consumer goods
d. the change in consumption resulting from a $1 change in the price level

Q40. The consumption function shows
a. how fast the economy is consuming its capital
b. that the amount of national income determines the rate at which the economy consumes its resources
c. that households' incomes determine how much the households will spend for consumer goods
d. the rate at which people actually use up their consumer goods

Q41. In the simple Keynesian model, if output exceeds aggregate expenditures,
a. there will be no response from businesses
b. inventories will decrease and businesses will increase output
c. inventories will increase and businesses will increase output
d. inventories will increase and businesses will decrease output

Q42. If planned construction investment increases by $30 billion and the MPC is two-thirds, total output will increase by
a. $30 billion
b. $20 billion
c. $45 billion
d. $90 billion

Q43. "A given change in business investment will cause a larger change in equilibrium output." This statement describes an important Keynesian concept called the
a. multiplier effect
b. marginal propensity to consume
c. marginal propensity to invest
d. consumption function

Q44. In the multiplier formula, 1/MPS equals the multiplier.
a. true
b. false

Q45. The classical economists held that chronic unemployment was likely.
a. true
b. false

Q46. As income increases, the absolute level of planned consumption will increase.
a. true
b. false

Q47. The new classical school contends that government fiscal policy is better than monetary policy in controlling inflation.
a. true
b. false

Q48. Higher price levels are associated with lower aggregate expenditure at every level of income.
a. true
b. false

Q49. Any time that planned leakages exceed planned injections, the economy will expand.
a. true
b. false

Q50. According to the Keynesian model, increased foreign spending for U.S. goods is likely to
a. reduce total employment in the United States
b. increase total employment in the foreign country
c. reduce total output in the United States
d. increase total output in the United States

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