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Monetary Policy
Monetary Policy
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AP Macroeconomics - Monetary Policy
Flashcards
37 cards
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Questions
37
Answers
1
What is the term of office on the FED Board of Governors?
21 years
7 Years
4 years
14 years
2
If inflation= 2% and you want to earn 5% on $$ you loan out, what nom. int rate do you need?
greater than 5%
greater than 2%
greater than 7%
greater than 10%
3
An increase in daily transactions that consumers make due to an increase in income would likely
shift the supply curve in the money market to the right
shift supply curve in money market to the left
shift the supply curve of loanable funds
shift the demand curve in money market to the right
4
What should the y-axis be labeled on this graph?
real interest rate
money
inflation rate
nominal interest rate
5
Which of the following is an example of contractionary monetary policy?
increasing the reserve requirement
decreasing the discount rate
purchasing government securities
decreasing taxes
6
If the reserve requirement is 20%, the expansion multiplier is??
5
10
2
4
7
What is the present value of $110 paid one year from now if the interest rate is 10 percent?
$11
$100
$121
$99
8
which one of the following will NOT shift the money demand curve?
A change in Aggregate Price Level
The Federal Reserve
Changes in Real GDP
Changes in Technology like credit cards
9
The neutrality of money refers to the situation where....
increases in interest rates are matched by decreases in bond
decreases in the money supply result in incr in Int Rates
increases in the money supply cause no real incr in output
money has not been the cause of war
10
Which of the following is NOT a "tool of the Fed"?
Open Market Operations
Federal Funds Rate
Reserve Requirement
Discount Rate
11
The Value of Money is equal to....
Nominal Interest Rate
Quantity of Money
Real Interest Rate
2
12
To reduce inflation, the Federal Reserve could....
reduce the discount rate
contract the money supply
buy bonds
expand the money supply
13
What is the United States Central Bank called?
The Federal Reserve
The First Bank of the United States
The Second Bank of the United States
The European Central Bank
14
Esther uses money to go out to the movies, what function of money does this illustrate?
unit of account
medium of exchange
store of value
portability
15
1/RR is equal to what?
Spending Multiplier
Money Multiplier
Tax Multiplier
MPC
16
Which of the following policies would cause a movement from A to B on the graph?
Tax Increase
Fiscal Stimulus Package
Raising the Reserve Requirement
Contractionary Policy
17
What scenario is this graph depicting between Q* and Q1?
inflationary gap
peak in the business cycle
increase in aggregate supply
recessionary gap
18
What is money?
federal reserve notes
gold
Something generally accepted for the exchange of goods
anything backed by gold
19
What scenario is the graph depicting?
depression
recession
recessionary gap
inflationary gap
20
The real interest rate is stated simply as the....
the price of borrowed money in the future
nominal interest rate minus the expected inflation rate
nominal interest rate plus the expected inflation rate
inflation rate minus the CPI
21
What are demand deposits?
large scale institutional accounts
money market accounts
savings accounts
checking accounts
22
If a nation engages in expansionary fiscal policy (no affect on taxes) what will occur?
AD will shift to the left
supply of loanable funds will increase and IR will drop
purchase of domestic stocks and bonds will decrease
interest rates will increase and capital stock will decrease
23
Which of the following policies by the FED is aimed at changing the Fed Funds Rate?
Discount Rates
Open-Market Operations
Reserve Requirements
24
In the equation MV = PQ, PQ is equal to??
Real GDP
Aggregate Supply
The Money Supply
Demand
25
Who is the chairman of the Federal Reserve?
Paul Volcker
Janet Yellen
Alan Greenspan
Ben Bernake
26
Which of the following does the Federal Reserve use most often to combat a recession?
Selling securities
Increasing the Federal Reserve Rate
Reducing the Reserve Requirement
Buying Securities
27
What would be the best way for Congress to fix this economy's problem?
Selling Bonds
Reducing Government Spending
Buying Bonds
Lowering Taxes
28
This is the rate that banks charge other banks to borrow money "over-night"?
Inflation Rate
Heart Rate
Discount Rate
Federal Funds Rate
29
Which of the following changes would increase the size of the money multiplier?
a decrease in the reserve ration
congress issuing a tax cut
tightening regulations on loans
people holding more of their money outside of banks
30
The phillips curve shows a trade-off between?
unemployment and inflation
unemployment and RGDP
RGDP and Inflation
nominal and real interest rates
31
Flannery saves money in a CD for college, what function of money is this?
medium of exchange
store of value
durability
unit of account
32
What tool does the FED use most often?
Reserve Requirement
Discount Rate
Fed Funds Rate
Open-Market Operations
33
In the equation MV=PQ, the V stands for??
Verisimilitude
Variability
Velocity
Vanquish
34
An increase is the long run Aggregate Supply is equal to which of the following?
Increase outward of the nation's PP Curve
Movement along the phillips curve
Movement along the short-run AS curve
Movement to the peak of the business cycle
35
Which of the following entries constitute a liability for commercial banks?
Required reserves on hand at the FED
Demand deposits of its customers
Bonds and Securities
Outstanding loans to firms and households
36
This would most likely be caused by...
FED lowering the discount rate
FED taking action
a decrease in the price level
an increase in national income
37
Which of the following is the most liquid?
M3
M1
M2
