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12 Cards in this Set
- Front
- Back
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When the Federal Reserve increases the money supply, a. the equilibrium interest rate decreases. b. the aggregate-demand curve shifts to the left. c. the quantity of goods and services demanded is unchanged for a given price level. d. the long-run aggregate-supply curve shifts to the right. |
A |
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In recent years, the Fed has conducted policy by setting a target for the
a. size of the money supply. b. growth rate of the money supply. c. federal funds rate. d. discount rate. |
C |
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While a television news reporter might state that “Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent,” a more precise account of the Fed’s action would be as follows: a. “Today the Fed told its bond traders to conduct open-market operations in such a way that the equilibrium federal funds rate would decrease to 5.25 percent.” b. “Today the Fed lowered the discount rate by a quarter of a percentage point, and this action will force the federal funds rate to drop by the same amount.” c. “Today the Fed took steps to decrease the money supply by an amount that is sufficient to decrease the federal funds rate to 5.25 percent.” d. “Today the Fed took a step toward contracting aggregate demand, and this was done by lowering the federal funds rate to 5.25 percent.” |
A |
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The money-supply curve would shift rightward a. if the money demand curve shifted right. b. if the Federal Reserve chose to increase the money supply. c. if the interest rate increased. d. All of the above are correct. |
B |
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If the Fed conducts open-market purchases, the money supply a. increases and aggregate demand shifts right.b. increases and aggregate demand shifts left. c. decreases and aggregate demand shifts right.d. decreases and aggregate demand shifts left. |
A |
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If the stock market crashes, then a. aggregate demand increases, which the Fed could offset by increasing the money supply. b. aggregate demand increases, which the Fed could offset by decreasing the money supply. c. aggregate demand decreases, which the Fed could offset by increasing the money supply. d. aggregate demand decreases, which the Fed could offset by decreasing the money supply. |
C |
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Which of the following policy actions shifts the aggregate-demand curve? a. an increase in the money supply b. an increase in taxes c. an increase in government spending d. All of the above are correct. |
D |
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The government builds a new water-treatment plant. The owner of the company that builds the plant pays her workers. The workers increase their spending. Firms from which the workers buy goods increase their output.This type of effect on spending illustrates a. the multiplier effect. b. the crowding-out effect. c. the Fisher effect. d. the wealth effect. |
A |
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The term crowding-out effect refers to a. the reduction in aggregate supply that results when a monetary expansion causes the interestrate to decrease. b. the reduction in aggregate demand that results when a monetary expansion causes theinterest rate to decrease. c. the reduction in aggregate demand that results when a fiscal expansion causes the interestrate to increase. d. the reduction in aggregate demand that results when a decrease in government spending oran increase in taxes causes the interest rate to increase. |
C |
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If the MPC is 0.75 and there is no crowding-out effect, then an initial increase in aggregate demand of $100 billion will eventually shift the aggregate demand curve to the right by a. $80 billion. b. $125 billion. c. $400 billion. d. $500 billion. |
C |
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If businesses and consumers become pessimistic, the Federal Reserve can attempt to reduce the impact on the price level and real GDP by a. increasing the money supply, which raises interest rates. b. increasing the money supply, which lowers interest rates. c. decreasing the money supply, which raises interest rates. d. decreasing the money supply, which lowers interest rates. |
B |
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Critics of stabilization policy argue that a. there is a lag between the time policy is passed and the time policy has an impact on theeconomy. b. the impact of policy may last longer than the problem it was designed to offset. c. policy can be a source of, instead of a cure for, economic fluctuations. d. All of the above are correct. |
D |
