In terms of the aggregate demand model, how does one indicate an increase in the demand for cash?

a decrease in the growth rate of the velocity of money

The Federal Reserve's response to the oil crisis of the 1970s was to:

primarily address the problem of high inflation.

In which situation would economists say that monetary policy is credible?

It is expected that a central bank will stick with its policy.

In terms of the aggregate demand model, how does one indicate an increase in the demand for cash?

a decrease in the growth rate of the velocity of money

Which event occurred as a result of falling real estate prices in 2006 and 2007?

Homeowners felt poorer and started to spend less.

Monetary policy is often about _____, rather than just manipulating numbers and equations.

changing expectations and perceptions

If banks are unwilling to lend, then:

expansionary monetary policy will not be as effective.

Each of these events occurred as a result of falling real estate prices in 2006 and 2007 EXCEPT that:

government spending was crowded out by private investment.

In terms of the aggregate demand model, a decrease in the growth rate of the velocity of money would:

result from an increase in the demand for cash.

Which of these statements is TRUE?

One of the Fed's important tools is its ability to boost market confidence.

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Chapter 16

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Questions 32

Answers

1
Housing prices in the United States peaked in:
2004.
2008
2006
2001
2
SEE BELOW
1
2
4
3
3
It's _____ for the Federal Reserve to make booms and busts worse rather than better.
the usual case
possible
typical
unheard of
4
See below
3
2
1
4
5
In terms of the aggregate demand model, how does one indicate an increase in the demand for cash?
a decrease in the growth rate of the velocity of money
a decrease in the growth rate of the money supply
an increase in the growth rate of the velocity of money
an increase in the growth rate of the money supply
6
See below
4
1
3
2
7
Increasing demand for cash would lead to a lower:
stagflation.
money supply.
velocity.
uncertainty in the market.
8
The Federal Reserve's response to the oil crisis of the 1970s was to:
address neither problem
primarily address the problem of high inflation.
primarily address the problem of low real growth.
address both problems—high inflation and low real growth.
9
In the United States, who makes decisions about monetary policy?
the Federal Reserve
the Treasury Department
the president of the United States
Congress
10
See below
9%
3%
15%
12%
11
See below
3
4
1
2
12
In addition to influencing the money supply, the Federal Reserve is able to boost:
market confidence.
aggregate supply.
the long-run, real growth rate.
government spending.
13
See below
4
3
1
2
14
See below
3
4
2
1
15
Recall that M* + v* = Inflation + real growth
2, 4
6, 4
6, 8
1, 6
16
Recall that M* + v* = Inflation + real growth
4
2
9
6
17
In which situation would economists say that monetary policy is credible?
A central bank will cut interest rates during a recession
A central bank will make decisions using discretion rather than rules.
A central bank will raise interest rates during an expansion
It is expected that a central bank will stick with its policy.
18
Which of these statements is TRUE?
1
2
3
4
19
See below
4
1
3
2
20
The Federal Funds rate was at about _____% in 2000 and was _____% by the end of 2001.
6.5; up to 10
2; up to 6.5
2; down to 1
6.5; down to 2
21
In terms of the aggregate demand model, how does one indicate an increase in the demand for cash?
a decrease in the growth rate of the money supply
a decrease in the growth rate of the velocity of money
an increase in the growth rate of the velocity of money
an increase in the growth rate of the money supply
22
Which event occurred as a result of falling real estate prices in 2006 and 2007?
The Federal Funds rate began to rise.
The stock market hit record lows in 2008.
Homeowners felt poorer and started to spend less.
The economy underwent a significant deflation.
23
The unemployment effects of disinflation will be reduced if the disinflation policy is:
discretionary.
a smokescreen.
not credible.
credible.
24
Which of these statements is TRUE?
1
3
2
4
25
Which of these statements is TRUE?
2
3
4
1
26
Monetary policy is often about _____, rather than just manipulating numbers and equations.
trying to educate voters to make smart decisions at the polls
making tough decisions about which government programs get funding
changing expectations and perceptions
explaining economics to laypeople
27
In the late 1990s, the American economy was:
the envy of the world.
recovering from a mild recession.
one of the worst in the world.
entering one of the worst recessions, at that time, since Great Depression.
28
See below
1
2
4
3
29
If banks are unwilling to lend, then:
it will be hard to determine which Fed policy is best in the situation
the Fed will overshoot and generate an increase in AD larger than expected.
expansionary monetary policy will not be as effective.
contractionary monetary policy will not be as effective.
30
Each of these events occurred as a result of falling real estate prices in 2006 and 2007 EXCEPT that:
aggregate demand fell.
homeowners felt poorer and started to spend less.
government spending was crowded out by private investment.
new home construction dropped very quickly.
31
In terms of the aggregate demand model, a decrease in the growth rate of the velocity of money would:
decrease the demand for cash.
increase the demand for cash.
result from an increase in the demand for cash.
result from a decrease in the demand for cash.
32
Which of these statements is TRUE?
Uncertainty drives people away from assets like cash and toward investment.
Uncertainty never creates a bandwagon effect on investment.
An increase in the demand for cash raises the velocity of money.
One of the Fed's important tools is its ability to boost market confidence.

Chapter 16 Flashcards | StudBud