Econ 212-Spring 2007 Exam 3

Econ 212-Spring 2007 Exam 3 - SPRING, 2007 ECONOMICS 212...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 SPRING, 2007 ECONOMICS 212 D. K. BENJAMIN THIRD EXAM Print and encode your name student number and TA number on the scoring sheet. If you fail to do these actions correctly, you will be penalized five points . Mark on the scoring sheet the correct answer to each question. There are thirty (30) questions, each with only ONE correct answer. If you mark more than one answer to a question, you will receive zero credit. Engage brain before putting pencil in gear. Go Tigers . 1. An open market sale of bonds by the Fed will a. decrease the monetary base and thus increase the money supply b. decrease the money multiplier and thus decrease the money supply c. simultaneously increase the monetary base and decrease the money multiplier, thereby leaving the money supply unchanged d. decrease the monetary base and thus decrease the money supply e. increase the money multiplier and thus increase the money supply 2. An open market purchase of bonds by the Fed can a. help prevent the money supply from rising if other forces are tending to increase the money multiplier b. help prevent the money supply from rising if the R/D ratio is falling for other reasons c. help prevent the money supply from rising if the C/D ratio is falling for other reasons d. partly or completely offset a simultaneous increase in reserve requirements e. answers (a), (b), and (c) are correct 3. Suppose banks decide to hold a higher ratio of reserves to deposits. Which of the following will result? a. the money multiplier will fall b. the money supply will be unchanged in the long run, because the resulting lower reserve-deposit ratio will cause the monetary base to rise c. prices will be higher in the short run and the long run, compared to the initial equilibrium d. the money multiplier will rise e. answers (c) and (d) are correct 4. An increase in the C/D ratio would be expected to have which of the following consequences, relative to the initial long run equilibrium? a. lower prices in the short run b. lower output in the short run c. unchanged output in the long run d. lower prices in the long run e. all of the above 5. An increase in k, the cash balance ratio, would be expected to have which of the following consequences, relative to the initial equilibrium? a. higher prices in the short run b. lower output in the long run c. higher prices in the long run d. lower unemployment the long run e. none of the above
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Questions 6-9 are based on the following information. Assume the economy is in long run equilibrium, with output growing at its steady state rate and unemployment equal to the steady state (natural) rate. 6. Suppose the real interest rate is 2% and the expected inflation rate is 1% and the default premium is 0% (as it would be on federal government bonds. The nominal interest rate on regular (not indexed) government bonds will be approximately: a. 6% b. 5% c. 4% d. 3% e. 1% Continuing with this series of questions, assume the rate of growth of the monetary base is now unexpectedly
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 7

Econ 212-Spring 2007 Exam 3 - SPRING, 2007 ECONOMICS 212...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online