Mac test
A tax on U.S. imports of Chinese-made tires is likely to:
reduce the volume of imports
What is a tariff?
A tax on an import
If country A has a higher cost of producing good X than country B, then country:
B has a comparative advantage in the production of product X
A headline reads: "Fed Raises the Federal Funds Rate by Half a Point." The content of this headline indicates that monetary policy is:
Becoming more restrictive
The Federal Reserve System consists of which of the following?
Board of Governors and the 12 Federal Reserve Banks
If Federal Reserve officials attempt to pull the economy out of a recession when the price level is relatively stable, the policies they would most likely use would be to:
Buy government securities and decrease the discount rate
The Federal Reserve could increase the money supply by:
Buying government bonds on the open market
The economy is experiencing high unemployment and a low rate of economic growth and the Fed decides to pursue an expansionary money policy. Which action by the Fed would be most consistent with this policy?
Buying government securities
The economy is experiencing a low rate of economic growth and the Fed decides to pursue an expansionary money policy. Which set of actions by the Fed would be most consistent with this policy?
Buying government securities and lowering the discount rate
In international trade, if a country has a "comparative advantage" in a product this means:
it is relatively more efficient than other countries in making the product
The Federal funds rate and:
Prime interest rate are positively related
Which monetary policy would most likely increase aggregate demand?
Purchasing government securities in the open market
The specification of the maximum amounts of commodities which may be imported into a country in any period of time is a:
Quota
A newspaper headline reads: "Fed Raises Discount Rate for Third Time This Year." This headline indicates that the Federal Reserve is most likely trying to:
Reduce inflationary pressures in the economy
Currency and checkable deposits are:
The major components of money supply M1
Changes in the rate of interest will most likely affect:
Investment spending
The Federal Reserve System is divided into:
12 districts
Refer to the graph above. If the initial equilibrium interest rate was 5 percent and the money supply increased by $100 billion, then the new interest rate would be:
3 percent
Use the following list to answer the question about the money supply. Items 1. Money market mutual funds held by individuals 2. Savings deposits, including money market deposit accounts 3. Money market mutual funds held by businesses 4. Currency held by the public 5. Small time deposits 6. Checkable deposits Refer to the list above. The M1 money supply is composed of items:
4 and 6
Checkable deposits are money because they are:
Acceptable as payment
The major purpose of the Federal Reserve buying government securities in open market operations is to:
Allow banks to increase their lending
In the chain of cause and effect involving monetary policy:
An increase in the money supply will decrease the rate of interest
When a nation has a comparative advantage in producing a product, then in comparison with any other nation it can produce that product:
At a lower domestic cost
The purpose of an expansionary money policy is to:
Increase aggregate demand
A decrease in the interest rate will cause a(n):
Increase in the amount of money held as an asset
Which is an expansionary money policy?
Increase the money supply to shift the aggregate demand curve rightward
The Federal Reserve Banks are owned by the:
Member banks
A headline reads: "Fed Cuts the Federal Funds Rate by Half a Point." This suggests that:
Monetary policy has eased
In which case would the quantity of money demanded by the public tend to increase by the greatest amount?
The interest rate decreases and nominal GDP increases
Which statement is correct?
The prime interest rate rises and falls with the Federal funds rate
When the interest rate falls, the:
Total amount of money demanded increases
If the United States government were to impose a quota on wristwatches imported from Switzerland, the:
Total quantity of watches(domestically produced and imported) purchased would decline
The functions of money are to serve as a:
Unit of account, store of value, and medium of exchange
The fundamental objective of monetary policy is to assist the economy in achieving:
A full-employement, noninflationary level of total output
What function is money serving when you use it when you go shopping?
A medium of exchange
When the Federal Reserve uses open-market operations to raise the Federal funds rate several times over a year, it is pursuing:
A restrictive money policy
Which of the following is the best description of a quota?
A specification of the maximum amount of a product that may be imported in any period of time
When the Federal Reserve uses open-market operations to lower the Federal funds rate several times over a year, it is pursuing:
An expansionary money policy
The major problem facing the economy is high unemployment and weak economic growth. The inflation rate is low and stable. Therefore, the Federal Reserve decides to pursue a policy to increase the rate of economic growth. Which policy changes by the Fed would reinforce each other to achieve that objective?
Buying government securities and lowering the discount rate
The Board of Governors of the Federal Reserve System can increase commercial bank reserves by:
Buying government securities in the open market
The Federal Reserve can increase aggregate demand by:
Buying government securities in the open market
When the Fed wants to lower the Federal funds rate, it:
Buys bonds from banks and the public
The Federal Reserve System of the U.S. is the country's:
Central bank
The M1 money supply is composed of:
Checkable deposits and currency in circulation
Holding the money deposits of businesses and households and making loans to the public are the basic functions of:
Commercial banks and thrift institutions
The principal concept behind comparative advantage is that a nation should:
Concentrate production on those products for which it has the lowest domestic opportunity cost
The main function of the Federal Reserve System is to:
Control the money supply
The Federal Reserve System performs many functions but its most important one is:
Controlling the money supply
If the interest rate increases, there will be a(n):
Decrease in the amount of money held as assets
If interest rates rise, there will be a(n):
Decrease in the total amount of money demanded
If nominal GDP decreases this will:
Decrease the transactions demand and total demand for money
Import quotas on products will increase the price consumers pay for imported products and:
Decrease the volume of imports
An increase in the money supply usually:
Decreases the interest rate and increases aggregate demand
When the Federal Reserve acts to tighten money and credit in the economy, then the aggregate:
Demand curve will shift to the left
When the Federal Reserve acts to ease money and credit in the economy, then the aggregate:
Demand curve will shift to the right
Which one of the following is to be a tool of monetary policy for altering the reserves of commercial banks?
Discount Rate
The tools of monetary policy for altering the reserves of commercial banks are the:
Discount rate, reserve ratio, and open-market operations
A newspaper headline reads: "Fed Cuts Federal Funds Rate for Fifth Time This Year." This headline indicates that the Federal Reserve is most likely trying to:
Ease monetary policy
Monetary policy in the United States is the responsibility of the:
Federal Reserve
The conduct of monetary policy in the United States is the main responsibility of the:
Federal Reserve
A key difference between tariffs and quotas is that the:
Government receives revenue with tariffs
Trade protectionism (barriers) for a product will result in:
Higher prices for imports of that product
An increase in nominal GDP will:
Increase the transactions demand and total demand for money
When the Federal Reserve Banks decide to buy government bonds from banks and the public, the supply of reserves in the Federal funds market:
Increases and the Federal funds rate decreases
If the Federal funds rate:
Increases, the prime interest rate will increase
The Federal Reserve System is an:
Independent agency of government
An increase in the money supply is likely to decrease:
Interest rates
The most important among the Federal Reserve district banks in conducting monetary policy is the:
New York bank
The most frequently used monetary device for achieving price stability is:
Open-Market operations
Which one of the following is a tool of monetary policy for altering the reserves of commercial banks?
Open-Market operations
The interest rate that banks use as a benchmark rate for interest rates on a wide range of loans to businesses and individuals is the:
Prime interest rate
Which one of the following is a tool of monetary policy for altering the reserves of commercial banks?
Reserve Ratio
Suppose the economy is at full employment with a high inflation rate. Which combination of government policies is most likely to reduce the inflation rate?
Sell government securities in the open market and decrease government spending
The economy is experiencing inflation and the Federal Reserve decides to pursue a restrictive money policy. Which actions by the Fed would be most consistent with this policy?
Selling government securities
Inflationary pressure is a growing problem for the economy. Therefore, the Federal Reserve decides to pursue a policy to reduce the inflationary pressure. Which policy changes by the Fed would reinforce each other to achieve that objective?
Selling government securities and raising the discount rate
When the Fed wants to raise the Federal funds rate, it:
Sells bonds to banks and the public
Import quotas
Set the number of units of a product that can be imported
The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for:
Setting the Fed's monetary policy and directing the purchase and sale of government securities
A tax on an imported product is a:
Tariff
An tax on imported commodities is known as a(n):
Tariff
The level of GDP will tend to increase when:
The Federal Reserve buys government securities in the open market
Which organization meets regularly to establish rules related to international trade?
The World Trade Organization
Which statement is true?
The prime interest rate will be higher than the Federal funds rate
Assume the economy faces high unemployment but stable prices. Which combination of government policies is most likely to reduce unemployment?
The purchase of government securities in the open market and an increase in government spending
Refer to the graph above. If the interest rate rises from 2 percent to 3 percent, the supply of money must have:
decreased by $50 billion
f the money supply of a country doubles, a likely result is ________.
inflation
The asset demand for money and the rate of interest are:
inversely related
Chapter 14
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Chapter 19
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Chpater 15
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Suppose that the Federal Reserve (Fed) wishes to implement an expansionary (loose) policy to increase economic growth in the U.S. economy. Which policy would the Fed most likely adopt?
reduce interest rates and increase money supply
A major goal of the World Trade Organization is to:
reduce trade barriers and expand international trade among nations
The principle of comparative advantage indicates that mutually beneficial international trade can take place only when:
relative costs of production differ between nations
An tax that is applied to imported products which are not produced domestically is a(n):
tariff
Changes in interest rates cause a shift in:
the aggregate demand curve
