Monetary Policy

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Question 1
Free
Multiple Choice

The Fed can ____ the level of spending as a means of stimulating the economy by ____ the money supply.

Choose correct answer/s
A

increase; decreasing

B

decrease; increasing

C

decrease; decreasing

D

increase; increasing

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Question 2
Free
Multiple Choice

A credit crunch occurs when:

Choose correct answer/s
A

interest rates decline.

B

interest rates rise.

C

creditors restrict the amount of loans they are willing to provide.

D

the economy is strong.

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Question 3
Free
Multiple Choice

In general, there is:

Choose correct answer/s
A

a positive relationship between unemployment and inflation.

B

an inverse relationship between unemployment and inflation.

C

an inverse relationship between GDP and inflation.

D

a positive relationship between GDP and unemployment.

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Question 4
Free
Multiple Choice

A ____ -money policy can reduce unemployment, and a ____ -money policy can reduce inflation.

Choose correct answer/s
A

tight; loose

B

loose; tight

C

tight; tight

D

loose; loose

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Question 5
Free
Multiple Choice

A loose-money policy tends to ____ economic growth and ____ the inflation rate.

Choose correct answer/s
A

stimulate; place downward pressure on

B

stimulate; place upward pressure on

C

dampen; place upward pressure on

D

dampen; place downward pressure on

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Question 6
Multiple Choice

____ serves as the most direct indicator of economic growth in the United States.

Choose correct answer/s
A
Gross domestic product (GDP)
B
National income
C
The unemployment rate
D
The industrial production index
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Question 7
Multiple Choice

Which of the following is not an indicator of inflation?

Choose correct answer/s
A
housing price indexes
B
wage rates
C
oil prices
D
consumer confidence surveys
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Question 8
Multiple Choice

The ____ indicators tend to rise or fall after a business cycle.

Choose correct answer/s
A
leading
B
lagging
C
coincident
D
none of the above
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Question 9
Multiple Choice

The ____ indicators tend to rise or fall at the same time as a business cycle.

Choose correct answer/s
A
leading
B
lagging
C
coincident
D
none of the above
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Question 10
Multiple Choice

The time lag between when an economic problem arises and when it is reported in economic statistics is the

Choose correct answer/s
A
recognition lag.
B
implementation lag.
C
impact lag.
D
open-market lag.
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Question 11
Multiple Choice

The time between when the Fed adjusts the money supply and when the adjustment has an effect on the economy is the

Choose correct answer/s
A
recognition lag.
B
implementation lag.
C
impact lag.
D
open-market lag.
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Question 12
Multiple Choice

Which of the following best describes the relationship between the Fed and the presidential administration?

Choose correct answer/s
A
The Fed must receive approval by the administration before conducting monetary policy.
B
The Fed must implement a monetary policy specifically to the support the administration's policy.
C
The administration must receive approval from the Fed before implementing fiscal policy.
D
A and C
E
none of the above
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Question 13
Multiple Choice

A high budget deficit tends to place ____ pressure on interest rates; the Fed's tightening of the money supply tends to place ____ pressure on interest rates.

Choose correct answer/s
A
upward; upward
B
upward; downward
C
downward; downward
D
downward; upward
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Question 14
Multiple Choice

Costner National, a commercial bank, obtains short-term deposits and makes long-term fixed-rate loans. It should be adversely affected when the Fed:

Choose correct answer/s
A
purchases Treasury securities.
B
maintains a stable money supply.
C
uses a tight-money policy.
D
uses a loose-money policy.
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Question 15
Multiple Choice

The ____ lag is the time from when an economic problem arises until it is recognized.

Choose correct answer/s
A
Recognition
B
Adjustment
C
Implementation
D
none of the above
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Question 16
Multiple Choice

A ____ dollar tends to exert inflationary pressure in the United States.

Choose correct answer/s
A
Stable
B
Strong
C
Weak
D
both A and B
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Question 17
Multiple Choice

There is some evidence that high money supply growth may lead to _______ U.S. inflation over time, which in turn places ____ pressure on U.S. interest rates.

Choose correct answer/s
A
higher; upward
B
higher; downward
C
lower; downward
D
lower; upward
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Question 18
Multiple Choice

If the Fed uses a passive monetary policy during weak economic conditions,

Choose correct answer/s
A
it increases the money supply substantially.
B
it reduces the money supply substantially.
C
it allows the economy to fix itself.
D
it purchases commercial paper and mortgage-backed securities.
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Question 19
Multiple Choice

Which of the following is true about an increase in the U.S. government's budget deficit?

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A
It will lead to global crowding out if U.S. interest rates fall below the level of interest rates in other countries.
B
It will cause outflows of foreign funds from the United States as foreign investors move their funds to other countries.
C
It will cause an inward shift in the aggregate demand for funds curve.
D
None of the above
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Question 20
Multiple Choice

Inflation is commonly the result of a

Choose correct answer/s
A
large budget deficit.
B
high level of interest rates.
C
high level of unemployment.
D
high level of aggregate demand.
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