assessment8 - Assessment 8 (Due: 5:10pm, 14 Nov (Fri))...

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Unformatted text preview: Assessment 8 (Due: 5:10pm, 14 Nov (Fri)) Submit via WebCT!!! 1) he money market model is concerned with ________ and the loanable funds market model T is concerned with ________. A) hort-term real interest rates; long term nominal interest rates s B) hort-term nominal interest rates; long term nominal interest rates s C) hort-term real interest rates; long term real interest rates s D) hort-term nominal interest rates; long term real interest rates s 2) f the Fed pursues expansionary monetary policy then I A) he money supply will decrease, interest rates will rise and GDP will fall. t B) he money supply will decrease, interest rates will fall and GDP will fall. t C) he money supply will increase, interest rates will rise and GDP will rise. t D) he money supply will increase, interest rates will fall and GDP will rise. t 3) ontractionary monetary policy causes C A) ggregate demand to rise, and the price level to rise. a B) ggregate demand to fall, and the price level to fall. a C) ggregate demand to rise, and the price level to fall. a D) ggregate demand to fall, and the price level to rise. a 4) all Street W A) oes not care about monetary policy. d B) ares about monetary policy because changes in the interest rate affect the economy. c C) ares about monetary policy because interest rates do not affect the attractiveness of c stock investments. D) ares about monetary policy because falling interest rates make stocks less attractive as c investments. 5) uppose that the economy is producing above potential GDP and the Fed implements the S correct change in monetary policy, but does so too late. Then A) he Fedʹs contractionary policy will result in too large of a decrease in GDP. t B) he Fedʹs contractionary policy will result in too small of a decrease in GDP. t C) he Fedʹs expansionary policy will result in too small of a decrease in GDP. t D) he Fedʹs expansionary policy will result in too large of an increase in GDP. t 6) monetary growth rule means that A A) he Fed will lower interest rates if it thinks a recession is on the horizon. t B) he Fed will raise interest rates if it thinks the economy is growing faster than potential. t C) he money supply should grow at a constant rate. t D) he money supply should grow in response to economic conditions. t 1 Assessment 8 (Due: 5:10pm, 14 Nov (Fri)) Submit via WebCT!!! 7) hy doesnʹt the Fed have both a money supply target and an interest rate target? W A) he Fed controls money demand but not money supply, so it cannot set the T equilibrium values of both. B) he Fed controls money supply but not money demand, so it cannot set the T equilibrium values of both. C) he Fed can only control money demand. T D) he Fed controls both money supply and money demand, but setting both targets will T destabilize the economy. 10) 8) he Taylor rule helps explain the relationship between the Fedʹs ________ and ________. T A) oney supply target; economic conditions m B) oney supply target; the federal funds target m C) ederal funds target; the monetary growth rule f D) ederal funds target; economic conditions f 9) hich of the following is NOT an argument against inflation targeting? W A) nflation targeting reduces the flexibility of the Fed to pursue other policy goals. I B) nflation targeting assumes that the Fed can accurately forecast future inflation rates. I C) nflation targeting makes monetary policy ineffective because the targets are publicly I announced. D) nflation targeting holds the Fed accountable for an inflation goal, but may make it less I likely the Fed will achieve other goals. A government could use control of a central bank to further its political interests by A) ncreasing the money supply before an election to decrease production and i employment. B) ncreasing the money supply before an election to increase production and i employment. C) ecreasing the money supply before an election to decrease inflation. d D) ecreasing the money supply before an election to increase inflation. d 2 ...
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This note was uploaded on 04/22/2010 for the course ECONOMICS ECON1002 taught by Professor None during the Spring '10 term at Hong Kong Institute of Vocational Education.

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