Question 1

Cash drains decrease the monetary base, but not the money supply.

Accepted Answer

A) True 
 B)False

Question 2

Transaction deposits, such as DDAs, expand when the Fed sells securities.

Accepted Answer

A) True 
 B)False

Question 3

A decrease in reserve requirements could lead to a(n)

Accepted Answer

A)   Increase in bank lending
B)   Increase in the money supply
C)   An decrease in the discount rate
D)   All aboveESSAY QUESTIONS D

Question 4

Restrictive monetary policy first impacts the market, security prices and interest rates.

Accepted Answer

A)   money, increasing, decreasing
B)   capital, increasing, decreasing
C)   money, decreasing, increasing
D)   mortgage, increasing, decreasing

Question 5

Monetary policies directed toward increased economic growth may have what impact upon the value of the dollar in relation to other currencies?

Accepted Answer

A)   increase
B)   decrease
C)   no effect
D)   none of the preceding B

Question 6

Deposits tend to expand whenever:

Accepted Answer

A)   reserve requirements decrease.
B)   the public holds more cash.
C)   reserve requirements increase.
D)   monetary policy "tightens".

Question 7

The expected effect of quantitative easing (QE) in 2010 and 2011 is to lower long-term interest rates to boost the economy.

Accepted Answer

A) True 
 B)False

Question 8

Decreasing interest rates increase financial wealth and encourage consumer spending.

Accepted Answer

A) True 
 B)False  True

Question 9

Which of the following would most likely decrease the Federal Funds rate?

Accepted Answer

A)   decrease in the discount rate.
B)   sale of securities by the Fed.
C)   decrease in reserve requirements.
D)   none of the above

Question 10

The goals of U.S. monetary policy were set by Congress.

Accepted Answer

A) True 
 B)False

Question 11

Unemployment should fall if

Accepted Answer

A)   wages increase and people expect prices to rise, too.
B)   wages increase and people expect prices to be stable.
C)   interest rates rise more than prices are expected to rise.
D)   the money supply decreases.

Question 12

Monetarists believe that an increase in the money supply, all else equal, will cause:

Accepted Answer

A)   consumption expenditures to rise.
B)   investment spending to fall.
C)   national income to fall.
D)   government expenditures to rise.

Question 13

Generally, plant and equipment investment spending will decrease if

Accepted Answer

A)   interest rates rise while inflation remains unchanged.
B)   inflation decreases while interest rates remain unchanged.
C)   reserve requirements rise.
D)   any of the above

Question 14

A significant move by the Fed toward a "tight" money policy is likely to enhance exports.

Accepted Answer

A) True 
 B)False

Question 15

Changes in spending caused by changing security values are called the

Accepted Answer

A)   liquidity effect
B)   wealth effect
C)   income effect
D)   reactionary effect

Question 16

How does the Federal Reserve control the money supply by controlling the size of the monetary
base? Note the tools of monetary policy and how each can affect the monetary base and money
supply.

Accepted Answer

By controlling the monetary base, the Fe...

Question 17

Interest rates and the money supply tend to vary inversely, at least in the short term.

Accepted Answer

A) True 
 B)False

Question 18

Housing investment is sensitive to changes in interest rates.

Accepted Answer

A) True 
 B)False

Question 19

A decrease in reserve requirements will definitely cause

Accepted Answer

A)   expenditures to fall.
B)   inflation expectations to fall.
C)   an increase in the Fed Funds rate.
D)   excess reserves to increase.

Question 20

Monetary policy probably affects all of the following except

Accepted Answer

A)   housing investment.
B)   consumer durable investment.
C)   inventory investment.
D)   federal government budget outlays.

Exam 3: The Fed and Interest Rates

Cash drains decrease the monetary base, but not the money supply.

Correct AnswerverifiedShow Answer

Transaction deposits, such as DDAs, expand when the Fed sells securities.

Correct AnswerverifiedShow Answer

A decrease in reserve requirements could lead to a(n)

Correct AnswerverifiedD

Restrictive monetary policy first impacts the market, security prices and interest rates.

Correct AnswerverifiedShow Answer

Monetary policies directed toward increased economic growth may have what impact upon the value of the dollar in relation to other currencies?

Correct AnswerverifiedB

Deposits tend to expand whenever:

Correct AnswerverifiedShow Answer

The expected effect of quantitative easing (QE) in 2010 and 2011 is to lower long-term interest rates to boost the economy.

Correct AnswerverifiedShow Answer

Decreasing interest rates increase financial wealth and encourage consumer spending.

Correct AnswerverifiedTrue

Which of the following would most likely decrease the Federal Funds rate?

Correct AnswerverifiedShow Answer

The goals of U.S. monetary policy were set by Congress.

Correct AnswerverifiedShow Answer

Unemployment should fall if

Correct AnswerverifiedShow Answer

Monetarists believe that an increase in the money supply, all else equal, will cause:

Correct AnswerverifiedShow Answer

Generally, plant and equipment investment spending will decrease if

Correct AnswerverifiedShow Answer

A significant move by the Fed toward a "tight" money policy is likely to enhance exports.

Correct AnswerverifiedShow Answer

Changes in spending caused by changing security values are called the

Correct AnswerverifiedShow Answer

How does the Federal Reserve control the money supply by controlling the size of the monetary base? Note the tools of monetary policy and how each can affect the monetary base and money supply.

Correct AnswerverifiedBy controlling the monetary base, the Fe...View AnswerShow Answer

Interest rates and the money supply tend to vary inversely, at least in the short term.

Correct AnswerverifiedShow Answer

Housing investment is sensitive to changes in interest rates.

Correct AnswerverifiedShow Answer

A decrease in reserve requirements will definitely cause

Correct AnswerverifiedShow Answer

Monetary policy probably affects all of the following except

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
By controlling the monetary base, the Fe...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified