chapter 16

Monetary policy is much less effective at combating _____ than _____. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesaggregate demand shocks; nominal shocksnominal shocks; real shocksaggregate demand shocks; real shocksreal shocks; aggregate demand shocks

real shocks; aggregate demand shocks

A negative real shock leads to a _____ rate of price inflation and a lower _____. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choiceslower; interest ratehigher; interest ratelower; real growth ratehigher; real growth rate

higher; real growth rate

In the week before the terrorist attacks of September 11, 2001, the Federal Reserve lent about $34 million to banks. On September 12, 2001, it lent $45.5 billion to banks. This highlights the importance of the Fed's role in boosting: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesmarket confidence.inflation.the monetary base.discount window lending.

market confidence.

A number of economists have argued that the Federal Reserve policy in _____ contributed to the housing boom and eventual bust that led to the financial crisis in 2007-2008. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices2007-20082001-20041990-19941929-1933

2001-2004

Which statement describes a difficulty that makes it hard for the Fed to get monetary policy exactly right all of the time? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesChanges in monetary policy typically affect the economy with a lag that can vary from 6 to 18 months.Monetary policy affects only the monetary base, not M1 or M2.It is not possible to calculate exactly how monetary policy will shift the Solow growth curve.The Fed has so many monetary policies that it is hard to determine which is best in any given situation.

Changes in monetary policy typically affect the economy with a lag that can vary from 6 to 18 months.

If the Fed is able to use monetary policy to perfectly offset a negative aggregate demand shock and end a recession, all else equal, which statement is TRUE? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesThe real growth rate in the long run will be lower than it was before the recession.Real GDP in the long run will be the same as before the recession.The rate of inflation in the long run will be higher than it was before the recession.Inflation expectations in the long run will be the same as before the recession.

Inflation expectations in the long run will be the same as before the recession.

If the Federal Reserve overstimulated the economy, how would this most likely affect inflation? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesInflation would fall.Inflation would rise.Inflation would become deflation.Inflation does not change in the long run, regardless of what the Fed does.

Inflation would rise.

Which statement is FALSE? the end of 2001 to mid-2004, low interest rates helped to make credit cheap throughout the economy, which meant that it was relatively easy to borrow money. It is possible for the Federal Reserve to make booms and recessions worse rather than better. The Fed has little power to influence aggregate demand, but that power is constrained by uncertainty. A distorted price signal arises when government policy moves a price in a manner that encourages investors to take risks.

The Fed has little power to influence aggregate demand, but that power is constrained by uncertainty. It has considerable power.

Given a best-case scenario, which statement correctly describes the Federal Reserve's behavior? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesThe Federal Reserve tries to offset a negative shock to aggregate demand with an increase in the money supply.The Federal Reserve tries to avoid positive shocks to aggregate demand by decreasing the money supply.The Federal Reserve tries to offset a positive shock to aggregate demand with an increase in the money supply.The Federal Reserve tries to avoid negative shocks to aggregate demand by increasing the money supply.

The Federal Reserve tries to offset a negative shock to aggregate demand with an increase in the money supply.

What impact would radical disinflation have on unemployment? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesUnemployment would rise permanently.Unemployment would rise in the short run only.Unemployment would fall permanently.Unemployment would fall in the short run only.

Unemployment would rise in the short run only.

One of the Federal Reserve's most powerful tools is its influence over _____, not its influence over _____. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesthe rate of inflation; expectationsinterest rates; the money supplyexpectations; the money supplyinterest rates; the rate of inflation

expectations; the money supply

Each these events occurred as a result of falling real estate prices in 2006 and 2007 EXCEPT that: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesthe economy underwent a significant deflation.financial intermediation began to freeze up.banks took huge losses on poor investments in mortgage securities.the growth rate of the money supply fell.

the economy underwent a significant deflation.

One of the Federal Reserve's most powerful tools is its influence over _____, not its influence over _____. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choicesthe rate of inflation; expectationsinterest rates; the money supplyexpectations; the money supplyinterest rates; the rate of inflation

the rate of inflation