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Unformatted text preview: Name ______________ PSU ID ___________ FORM A Exam #2 Econ 4: Section 003 spring 2008 Chuderewicz PLEASE do all your work on exam sheet as in writing a small A or small B next to each question. When done, fill out your scantron. Thanks for your cooperation! GOOD LUCK! 1 Exam 2 TF / MC portion Econ 004 Chuderewicz ANSWER A FOR TRUE AND B FOR FALSE 1. The discount rate is currently set by the Fed to be 25 basis points lower than their target for the federal funds rate. 2. The FOMC is typically scheduled to meet eight times per year. 3. If the actual federal funds rate is higher than target then the Fed can move the funds rate back to towards the target by conducting open market sales (hint, draw a picture). 4. Since September, 2007, the Fed has been lowering their target for the federal funds rate. In terms of open market operations, the Fed would need to conduct a significant amount of open market purchases and by doing so, will shift the reserve supply curve to the right. 5. If the Fed was worried about overheating, then the appropriate open market operation would be for the Fed to conduct open market sales. 6. We argued that really low interest rates on short term government securities like the three month US Tbill, signals that investors are scared and thus, rushing to the safe haven of US Tbills. 7. Each regional bank president of the Federal Reserve system votes at all FOMC meetings. 8. If reserve demand is higher than the predicted (forecasted) reserve demand, then the actual federal funds rate will be lower than the targeted fed funds rate (hint draw a picture). 9. Jurassic Park economics refers to the old time economists that still believe Keynesian economics does not work. 10. One of the groups against free trade is organized labor since organized labor often loses jobs due to the cheap labor available abroad. 11. When applying the Samuelson model to Dub Chud, we showed that if Dub gains a comparative advantage in Mowing then (all else constant) the gains from trade to Chud fall, implying that Chud has to work more than before just to reach the same level of welfare. In the real world, this phenomenon is referred to (by Samuelson) as a fall in real wages....
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- Spring '07