Chapters 13, 14, 15, 16, 18 Exam

An economy is producing at a level of output that is equal to the full-employment level of output. Prices of a fundamental resource, such as oil, increase significantly. What would be the best monetary policy? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A stimulative policy b A restrictive policy c A stimulative policy followed by a restrictive policy d A restrictive policy followed by a stimulative policy e There is no obviously correc

E

"An increase in the budget deficit can be beneficial for the economy," said a member of Congress during the November budget debates. Could this statement be true? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Yes b No

A

An increase in the money supply would cause Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a bond prices to rise, interest rates to fall, and an increase the quantity demanded for money. b bond prices to fall, interest rate to fall, and an increase in the demand for money. c bond prices to fall, interest rates to fall, and an increase the quantity demanded of money. d bond prices to rise, interest rates to fall and an increase in the demand

A

Assume the economy faces high unemployment but stable inflation. Which combination of government policies is most likely to reduce unemployment? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The purchase of government securities in the open market and an increase in government spending. b The sale of government securities in the open market and a decrease in taxes. c The sale of government securities in the open market and a decrease in g

A

If the Chinese government seeks to weaken its currency it will likely ____________. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Sell its currency causing it to lose value b Buy its currency causing it to lose value c Sell the dollar causing the yuan to lose value d None of the above

A

Once decisions have been made to use monetary policy and fiscal policy to solve a problem, it will take more time for monetary policy to have an effect on real GDP and the inflation rate than would an increase in government spending. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a True b False

A

The Federal Reserve Banks are quasi-public banks which means that Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a they are privately owned but managed in the public interest. b they deal only with banks of foreign nations. c they deal only with commercial banks, and not the public. d they are publicly owned but privately operated.

A

The demand for money will shift to the right as a result of (multiple answers are accepted) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a an increase in GDP. b an increase in the interest rate. c a decline in the interest rate. d an increase in wealth.

A

The discount rate is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the interbank overnight lending rate of at least 1 million dollars. b the rate that a bank pays the Fed when it borrows from the Fed. c the rate that the Treasury pays when it borrows from the Fed. d none of the above.

A

The interest rate that the Fed charges banks for loans to them through the traditional channel is called Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the discount rate. b the term auction rate c the Federal Funds rate. d the T-Bill rate.

A

The newspaper headline in December, 2019, that the Fed took no action on the federal funds rate indicates that Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a there appears to be no or little risk of inflation. b the risk of inflation is high. c the unemployment rate has fallen even farther. d the unemployment rate has risen.

A

The supply of money is vertical because it is assumed that Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the Fed has the ultimate control of the money supply. b banks create money through the multiplier process. c bank behavior in creating money is pro-cyclical. d all of the above.

A

Ways the U.S. can reduce its current account deficit include the following, except: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Reduce exports to international countries by eliminating free trade agreements b Manipulate the exchange rate to make U.S. exports appear cheaper to people and businesses abroad and imports more expensive to U.S. consumers c Encourage U.S. consumers to switch from international products to U.S.-made products d

A

Which event would cause the dollar to appreciate against the euro, if everything else remains the same? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a An increase in interest rates in the U.S. b An increase in interest rates in Europe c A decline in interest rates in the U.S. d A decline in prices in Europe

A

Which of the following does not explain why the United States currency is valuable? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It is backed by gold. b It is widely accepted in transactions. c It is designated "legal tender" by the federal government. d It is relatively scarce.

A

Which of the following groups would prefer monetary policy to ameliorate a recession, as opposed to fiscal policy? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Borrowers b Lenders

A

Which of the following is not a sufficient reason for the preference of fiscal polcy over monetary policy in a recession? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The implementation lag. b The effectiveness lag. c Both A and B. d None of the above.

A

Which of the following varies directly with the interest rate? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The opportunity cost of holding money. b The transaction demand for money. c The price of a bond. d All of the above.

A

A country may try to fix its exchange rate in order to do which of the following? Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a Prevent large swings in the demand for its exports b Reduce uncertainty for businesses involved in international trade c Maintain an independent monetary policy

A, B

Which of the following enables a country to fix its currency to another currency? Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a Buying domestic currency or selling foreign currency to assure a stable exchange rate b Buying and selling foreign government bonds to assure a stable exchange rate c Selling domestic currency or buying foreign currency to assure a stable exchange rate

A, B, C

Which of the following make(s) the conduct of discretionary policy difficult? Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a The Fed implements policy now that will affect the economy in the future b The Fed has to make forecasts about the future based on current data c The Fed is uncertain about how large the effect of a policy change will be

A, B, C

An increase in the world's perception of the U.S. as a good, safe place to invest causes which of the following? Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a A surplus in the financial account due to a rise in demand for financial assets b A surplus in the current account due to a rise in demand for financial assets c A decline in the current account as the trade deficit widens d A surplus in the cur

A, C

The ability to create money will ---------- as banks lend out --------- money. Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a increase more b increase less c decrease more d decrease less

A, D

Which of the following groups serve on the Federal Open Market Committee (select all that apply)? Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a All members of the Board of Governors b Selected members of congress c Members of the Senate Banking Committee d Five of the regional Federal Reserve Bank presidents

A, D

The Federal Reserve could reduce the money supply by Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a selling government bonds in the open market. b buying government bonds in the open market. c operating the term auction facility. d reducing the discount rate. e increasing quantitative easing. f raising the discount rate. g lowering the required reserve ratio.

A, F

We hold more money when the interest rate Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a rises because the opportunity cost of holding money is going up. b falls because it has a low opportunity cost. c falls because at lower interest rates the opportunity cost of holding money goes up. d rises because bonds are now too expensive so we sell them to hold more money

B

A newspaper report that the Federal Reserve will lower the discount rate again this year says that the Fed is trying to Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a rescue the banking industry. b stimulate the economy c fight off inflation d Increase the savings rate

B

A strong dollar increases ______________ and reduces ______________. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Exports; imports b Imports; exports c Imports; imports d Exports; exports

B

An increase in interest rates causes the Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a quantity demanded of money to increase. b quantity demanded of money to decrease. c demand for money to increase. d demand for money to decrease.

B

An increase in investment by Americans in Canada will have which of the following immediate effects? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a An increase in the U.S. financial account surplus b A decrease in the U.S. financial account surplus c An increase in the U.S. financial account deficit d A decrease in the U.S. financial account deficit e An increase in the U.S. current account deficit

B

Compare two situations:Year 1. Real GDP increases, and at the same time, interest rates increase.Year 2. Real GDP increases, and at the same time, interest rates decrease. What is a possible explanation of the difference? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a An increase in the money supply may have caused the increase in GDP in year 1; a decrease in spending may have caused the increase in GDP in year 2. b An increase in spending

B

Consider the following quote: "Over one and a half million people were laid off from jobs following the doubling of oil prices in 1979." What was the policy dilemma faced by monetary and fiscal policy makers? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Rising prices and falling unemployment b Rising prices and rising unemployment c Rising prices and rising interest rates d Rising prices and increased consumer confidence

B

During the Great Recession of 2007-2009, interest rates Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a decreased to about zero, and investments increased sharply. b decreased to about zero, and investments also declined sharply. c increased sharply, and investments declined significantly. d increased sharply, and investments also rose significantly.

B

If an economy appears to be growing rapidly and inflation appears to be becoming a serious problem, which of the following fiscal policies would be appropriate? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A decrease in capital gains taxes b A decrease in government spending c A reduction in personal income taxes d An increase in government transfer payments

B

If the Fed wants to reduce the monetary multiplier, it should Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a lower the required reserve ratio. b raise the required reserve ratio. c increase bank reserves. d lower interest rates.

B

If the economy were encountering a severe recession, proper monetary and fiscal policies would call for Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a selling government securities, raising the reserve ratio, lowering the discount rate, increasing interest paid on reserves held at Fed banks, and a budgetary surplus. b buying government securities, reducing the reserve ratio, reducing the discount rate, reducing interest paid on reserves he

B

Store owners in the U.S. accept dollars for the purchase of goods and services. Every day, you have woken up and believed that the exchange of dollars for goods and services could occur because Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a money is a unit of account. b money is a medium of exchange. c money serves as a store of value. d money is a commodity.

B

The U.S. $20 dollar bill is a commodity Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a because dollars have many uses in the society. b is an incorrect statement. c because the government has decreed, made into a law, that it is a commodity. d because it can be used to purchase things that are a commodity.

B

The functions of money serve as a Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a resource allocator, method for accounting, and means of income distribution b unit of account, store of value, and medium of exchange c determinant of consumption, investment, and government spending d factor of production, exchange, and aggregate supply

B

What monetary policy would intend to hold down inflation? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Reduce interest rates to increase investment spending b Decrease the money supply to shift the aggregate demand curve leftward c decrease the money supply to shift the aggregate supply curve leftward d Reduce the interest paid on banks' reserves.

B

When a consumer wants to compare the price of one product with another, money is functioning as a Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a store of value. b unit of account. c medium of exchange. d all of the above.

B

When the Federal Reserve announces that it is increasing the federal funds rate, we would expect to see banks do which of the following? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Increase the amount of loans they make since interest rates are higher. b Reduce their loans because they have fewer reserves due to the Fed's open market sales. c Reduce interest rates for depositors. d Complain about the situation.

B

Which event would cause the dollar to depreciate against the peso if everything else remains the same? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a An increase in prices in Mexico b An increase in prices in the U.S. c Expansionary monetary policy in Mexico d An increase in interest rates in the U.S.

B

Which of the following best describes the cause-effect chain of contractionary monetary policy? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A decrease in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP. b A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP. c An increase in the money supply will

B

Which of the following statements comparing the lags of monetary and fiscal policy is accurate? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The lag between the initiation of fiscal policy and the effect on real GDP is longer than the lag between the initiation of monetary policy and its effects. b The policy-making lag for fiscal policy is longer than monetary policy. c Monetary policy takes longer to have an effect on the economy if th

B

Which of the following statements is true? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A lower interest rate raises the opportunity cost of holding money. b Bond prices and the interest rate are inversely related. c The total demand for money is directly related to the interest rate. d The supply of money is directly related to the interest rate.

B

Banks are able to create money Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a by printing Federal Reserve notes. b because of our fractional reserve system. c because of our definition of money. d because the Federal Reserve allows them to.

B, C

If investment opportunities improve in Europe relative to the U.S., what would we expect to happen? Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a A nominal appreciation in the dollar b The nominal value of the dollar to depreciate c A nominal depreciation of the euro d The nominal value of the euro to appreciate

B, D

The Federal Funds Rate is Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a the rate that banks charge their most preferred customers. b the bank to bank overnight lending rate of at least 1 million dollars. c the rate a bank pays the Fed when it borrows money from the Fed. d the rate that a bank pays another bank when it borrows money on the federal funds market. e the rate that the Fed pays when it borr

B, D

A lower real interest rate typically induces consumers to Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a save more. b buy fewer imported goods. c purchase more goods that are bought using credit. d purchase fewer goods that are bought without using credit.

C

According to the Taylor rule, if the inflation gap is zero and real GDP rises by one percent above potential GDP, then the Fed should Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a raise the federal funds rate by one percentage point b lower the federal funds rate by one percentage point c raise the federal funds rate by half of a percentage point d lower the federal funds rate by half of a percentage point

C

According to the advocates of crowding out, an increase in government spending will cause the demand for money to ______________, then interest rates to ______________, which in turn causes investment spending to ______________. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Decrease, decrease, increase b Increase, decrease, increase c Increase, increase, decrease d Decrease, increase, increase

C

All of the following explain why the U.S. trade deficit with Germany would expand, except ______________. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Increased preferences for German products b Increased value of the dollar c Increased interest rates in Europe d Increase in prices in the U.S.

C

An economy is producing at a level of output that is equal to the full-employment level of output. Prices of a fundamental resource, such as oil, decrease significantly. What would be the best monetary policy? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A stimulative policy b A restrictive policy c No monetary or fiscal policy would be required. d There is no obviously correct policy, unless you can specify your goals.

C

An increase in the money supply is likely to reduce Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a nominal income. b the demand for money. c interest rates. d the general price level.

C

Assume that we are currently producing less than the potential level of GDP. Which of the following is a valid argument for active use of monetary policy instead of fiscal policy? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Fiscal policy is not effective in stimulating aggregate demand b Monetary policy stimulates aggregate supply c Fiscal policy may cause crowding out of investment d Fiscal policy will lead to lower interest rates

C

Checkable deposits are included in Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a M1 but not in M2 b M2 but not in M1 c both M1 and M2 d neither M1 nor M2

C

Expansionary fiscal policy will cause which of the following? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A decrease in interest rates. b A decrease in investment. c A rise in interest rates. d A decrease in the money supply.

C

In a fractional reserve banking system Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a bank panics cannot occur. b the monetary system must be backed by gold. c banks can create money through the lending process. d the Federal Reserve has no control over the amount of money in circulation.

C

Monetary policy is thought to be Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a equally effective in moving the economy out of a depression as in controlling demand-pull inflation. b more effective in moving the economy out of a depression than in controlling demand-pull inflation. c more effective in controlling demand-pull inflation than in moving the economy out of a recession. d only effective in moving the economy out of a depression.

C

Money eliminates the need for a coincidence of wants in trading primarily through its role as a Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a unit of account. b store of value. c medium of exchange. d medium of deferred payment.

C

Money supply M1 does not include the currency held by Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a business firms. b households in their wallets or purses. c commercial banks. d state and local governments.

C

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the demand for money can be represented by Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a line parallel to the horizontal axis. b a vertical line. c a downward sloping line or curve from left to right. d an upward sloping line or curve from left to right.

C

One major advantage of money serving as a medium of exchange is that it allows society to Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a transfer purchasing power from the present to the future. b measure the relative worth of products. c escape the complications of barter. d use credit cards instead of currency.

C

The Federal Reserve System was set up to be a ______________ and politically ______________ institution. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a large; well connected b all powerful; neutral c decentralized; independent d wealthy; adversarial

C

The largest component of the money supply (M1) is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a currency in bank vaults. b currency in circulation. c checkable deposits. d stock certificates.

C

The most commonly used monetary policy instrument is _________. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The required reserve ratio b The discount rate c The federal funds rate and open market operations d The interest rate on excess reserves

C

The prime rate is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the rate that they Fed pays when it borrows money from the US Treasury. b the overnight lending rate that they Fed charges a member bank. c the rate that banks charge their most preferred customers. d none of the above.

C

What is the opportunity cost of holding currency? (multiple answers are accepted) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The opportunity cost is zero. b The current interest rate on bonds. c The interest that could have been earned if the currency was in the bank. d Money doesn't have a cost until you spend it.

C

What three features of an economy are the most influential in exchange rate determination? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Interest rates, balance of payments, economic growth. b The GDP growth rate, interest rates, and the inflation rate. c The interest rate, the GDP growth rate, and purchasing power parity. d The inflation rate, the GDP gap, and the inflation gap.

C

Which is the most accurate sequence of events when the Fed buys T-Bills? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The money supply is decreased, which increases the interest rate, and causes investment spending, output, and employment to decrease b A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employment c The money supply is increased, which decreases the interest rate,

C

Which of the following best describes the immediate effect of an increase in U.S. tariffs on goods and services manufactured abroad? The balance of trade Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Surplus will decrease b Surplus will increase c Deficit will decrease d Deficit will increase e Will not change

C

Which of the following reasons make monetary policy preferable to fiscal policy in inflation? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A shorter implementation lag b There is no limit on how high the interest rate can go up. c Both A and B d None of the above make monetary policy better to fight inflation.

C

Which of the following will decrease the supply of money in the economy? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Depositing currency in a checking account. b A bank making a loan. c A customer repaying a loan. d A decrease in the required reserve ratio.

C

A decrease in the interest rate will cause a(n) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a increase in the quantity supplied of money. b decrease in the transaction demand for money. c decrease in the amount of money held as an asset. d increase in the amount of money held as an asset.

D

A temporary income tax cut will be ______________ effective as a fiscal policy than a permanent change ______________. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a More; because the government deficit will not increase by as much as it will if the tax cut is permanent b More; because future income is not affected c Less; because the government deficit will increase by more than it will if the tax cut is permanent d Less; because future i

D

An increase in the demand for money would cause Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a a fall in bond prices, an increase in interest rates, and an increase in the suppl of money. b a rise in bond prices, an increase in interest rates, and no change in the money supply. c a fall in bond prices, an increase in interest rates, and an increase in the quantity supplied of money. d a fall in bond prices, an increase in interest rates an

D

Assume that the economy is currently producing a level of real GDP above the full employment level of real GDP, and the government lowers taxes as part of a new economic policy. Which of the following monetary policies should the Federal Reserve undertake if it wants to encourage the economy to go to a full employment level of output? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Buy bonds b Lower government spending c Lower the discount

D

Assume there is only one bank and that all the people deposit all of their money into the bank. The people deposit $10 million and the bank holds 10 percent of the deposits as reserves. What is the simple money multiplier in this economy? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 90. b 1. c 20. d 10.

D

Contractionary monetary policy will likely be accompanied by a(n) ______________ in interest rates and that change in interest rates will cause a(n) ______________ in the value of the dollar. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Decrease; decrease b Increase; decrease c Decrease; increase d Increase; increase

D

Credit cards are part of Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a M1 and M2 b M1 but not M2 c M2 but not M1 d Neither M1 nor M2

D

If the Fed is trying to make the interest rates go down, its objective is to Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a decrease investment. b decrease the inflation rate. c decrease the money supply. d decrease unemployment.

D

In the short run which of the following is most responsible for the exchange rate? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a GDP growth rate. b Purchasing power parity. c The trade deficit or surplus. d Interest rates.

D

Other things being equal, an expansion of commercial bank lending Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a changes the composition, but not the size, of the money supply. b is desirable during a period of demand-pull inflation. c reduces the money supply. d increases the money supply.

D

The effectiveness of monetary policy is limited by the Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the location of the investment demand function. b the slope of the investment demand function. c being able to put off interest-sensitive spending decisions. d all of the above.

D

The goldsmith's ability to create money came from the discovery that Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a withdrawals of gold tended to exceed deposits of gold in any given time period. b consumers and merchants preferred to use gold for transactions, rather than paper money. c the goldsmith was required to keep 100 percent gold reserves. d paper money in the form of gold receipts was rarely redeemed for gold.

D

The paper money used in the United States is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a National Bank Notes. b Treasury Notes. c United States Notes. d Federal Reserve Notes

D

The simple money multiplier will ______________ as the required reserve ratio ______________ Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Increase, increases. b Not change, increases. c Decrease, decreases. d Increase, decreases

D

To maintain current interest rates, the Fed would buy government bonds in the open market when Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a investment demand decreases. b the demand for money decreases. c the discount rate increases. d the demand for money increases.

D

What do people and businesses abroad do with all the money U.S. residents send them in exchange for the goods and services we import? All of these except for: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Buy U.S. stocks and bonds b Build factories in the U.S. c Buy U.S. real estate d Sell their international government bonds to U.S.

D

When the federal reserve announces that it is increasing the federal funds rate, it is actually going to ___________. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a require that banks pay higher interest rates to each other. b change the law on the federal funds rate. c buy bonds in the open market until the federal funds rate rises to the new target d sell bonds in the open market until the federal funds rate rises to the new target

D

Which of the following accurately refers to "crowding in"? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Increased consumption in response to increased government spending b Increased investment in response to expansionary monetary policy c Increased consumption in response to contractionary fiscal policy d Increased investment in response to expansionary fiscal policy.

D

Which of the following explains why purchasing power parity does not hold? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Not all goods are traded. b Shipping costs could explain differences in exchange rates. c There may be import taxes or restrictions which alter prices. d All of the above are reasons why purchasing power parity does not hold.

D

Which of the following occurs when monetary authorities raise the excess reserves of commercial banks? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employment b A rise in interest rates increases the money supply, causing a decrease in investment spending, output, and employment c The money supply is decreased, which increases the

D

Which of the following would most likely cause an increase in the US exchange rate. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Higher US bond prices. b Lower interest rates. c The Fed pursuing expansionary policy. d All of the above. e None of the above.

D

The benefit of the current account deficit involves all of the following except: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a We have the ability to invest more in our domestic economy than we save as a country b Being able to borrow from people and businesses abroad gives us the ability to invest in more research and development that can increase our productivity c People and businesses abroad can find a productive use for their savings

E

When the U.S. economy has a current account deficit, all of the following may be true except: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It is a good sign since people and businesses abroad prefer to keep their extra saving in the U.S. rather than invest it in their domestic economy b It is a good sign since people and businesses abroad believe they can earn higher return if they keep their saving in the U.S c It is a good sign since i

E

Which of the following are false? Multiple answers:Multiple answers are accepted for this question Select one or more answers and submit. For keyboard navigation...SHOW MORE a The demand for money is upward sloping. b The demand for money is vertical. c The supply of money is the positive relationship between the quantity supplied of money and the interest rate. d Banks can create money. e Banks can create money by printing Federal Reserve Notes f The US money multiplier rises during recessions.

Everything but D