2035_spring06_exam3

2035_spring06_exam3 - 1 The money supply is related to the...

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Unformatted text preview: 1) The money supply is related to the nonborrowed monetary base, and related to the level of borrowed reserves. . - . . ’ p" .r’ wpositively; positively ! i 1... ‘3 ‘ Ill LB)/:§atively; not 7 i ‘ I -/ flay sitively; negatively , i t ri/ag ‘1 m (/h’ll?‘ 1" DL) D) negatively; negatively 2) The fluctuations in both money supply growth and the federal funds rate during 1979-1982 suggest that the Fed A) had shifted to borrowed reserVes as an operating target. B) had shifted to total reserves as an operating target. C) had shifted to the monetary base as an operating target. flue r intended to target monetary aggregates. I ,3) Based on the cumilitive economic release we have seen this semester, which of the following i ' descriptions of changes in aggregate demand and aggregate supply BEST describes the current state of the economy? A) The Federal Reserve's contractionary policy has decreased aggregate demand. At the same time, production cost increases has decreased aggregate supply. Therefore, we have seen a decrease in aggregate output with an unexpected increase in the price level. @oducnvity has increased which has decreased aggregate supply. At the same time, nsumption expenditutes, investment expenditures, and the Federal Reserve's slightly expansionary policy have increased aggregate demand. Combined, this has caused aggregate output to increase and the price level has, as expected, increased slightly. C) Because of production costs increases, which decreases aggregate supply, combined with consumption expenditure increase, which increase aggregate demand, We have an unexpected rise in the price level but stagnant growth in aggregate output. D) Productivity increases have caused the aggregate supply curve to increase, thus the we have increasing aggergate output and an expected decrease in the price level. 4) Which of the following BEST describes how the Federal Reserve has implemented changes in monetary policy this semester? A) The Fed has been implementing expansionary policy. B) The Fed has made no changes to monetary policy this semester. C) The Fed has been implementing contractionary policy. )y e Fed has been bringing policy back up to a normal level from an aggressive stance of e/ contrationary policy. a®The Fed has been bringing policy dovvn to a normal level from an aggressive stance of expansianary policy. _ V. A~1 5) The Fed accidentally discovered open market operations in the early A} 18905. B) 19003 @203 ) 191 05. 6) The increase in the availability of ATM's has caused the cost of acquiring currency to \l/ WhiCh will cause the currency ratio to l? , everything else held constant. A) decrease; decrease B) increase; decrease C increase; increase ecrease; increase :27) Suppose, at a given moment in time, there is an excess su ‘1 of reserves in t market. If the Fed wants the federal funds rate to stay at that level, then it should undertake an open market of bonds, everything else held constant If the Fed does nothing, however, the federal funds rate will __ ale decrease ,. I‘.‘ J«\ » B) purchase; decrease '} ’5» ”\ (kg) sale; increasev D) purchase; increase v 8) Funds held in A) all checkable and time deposits are subject to reserve requirments. B) all time deposits Q) all cheekable, time, and money market fund deposits ( {In/Hi1 checkable deposits 9) Each Fed bank president attends F OMC meetings; although only Fed bank presidents vote on policy, all provide input. A) three, twelve @ve, twelve C) three, ten D) five, ten - A_2 _ 10) 0f the four players in the money supply process, most observers agree that the most important player is A) the Office of Thrift Supervision. B?) the United States Treasury. the Federal Reserve System. in the FDIC. ‘ 11) The interest rate for primary credit is set __ basis points _ the federal funds rate. A) 50; above B) 50', below C) 00; above D) 100; below . .4 “nu-j . -' . (of 12) In the market for rese'i’Ves, an open market purchase ' the 6 ' ‘a of reserves Wthh causes the federal funds rate to fall, everything else held constant. A) decreases; demand . ,’ " .a' B) increases; demand C) decreases; supply r? y _. . ((1))! increases, supply 13) The Fed can offset the effects of an increaSe in float by engaging in A) a repurchase agreement. B) ap open market purchase. , = 'fi 1 '1 "g 3‘; C) atched sale-purchase transaction. D) an interest rate swap. 14) Suppose your payroll check is directly deposited to your checking account. Everything else held constantfltotal reserves in the banking system and the monetary base . @filam unchanged; increases )decrease; decreases C) decrease; increases ;7®}remain unchanged; remains unchanged 1 15) An increase in the monetary base that goes into currency is , while an increase that goes into deposits is A) multiplied; multiplied B) multiplied; not multiplied C) not multiplied; not multiplied . . . . ,' MD) IlOijl’H‘lllUplled; multiplred La _ 16) In practice, the Fed's policy of targeting money market conditions in the 19605 proved to be A) procyclical, helping to stabilize the economy. B) countercyclical, helping to stabilize the economy. C) countercyclical, die-stabilizing the economy. 5)):rocyclical, de-stabilizing the economy. 17) Everything else held constant, an increase in the Km will result in in the Ml mone multiplier and in the M2 money multiplier. @«fikih “Lox/n: i0 chan e' an crease )9 g 5 m B) no change; a decrease C) a decrease; a decrease ,xr‘m I "D) a1} increase; an increase , ,r K or 18) Suppose the Bank of China permanently decreases its purchases of U.S. government bonds and, instead: holds more dollarign deposit at the Fedeglgeserve. Everything else held constant, a open market would be the appropriate monetary policy action for the Fed to take to offset the expected in the monetary base in the United States. increase it {V} f: B) purchase; decrease. 1-..?! C) purchase; increase D) sale; decrease 19) March employment showed an increase of 21 1,000. A detailed look at the report showed that A) most of the gains in employment were concentrated in the health care and energy industries. B) most of the gains in employment were concentrated in the manufacturing and construction industries. C) all industries showed gains in employment. )5 (Lian industries, with the exception of manufacturing, showed gains in employment. ’A-4 20) Nationwide financial panics in the nineteenth and early twentieth centuries might have been tinged had M5) the Second Bank of the United States not been abolished in 1836 by president Andrew \sia'ckson. B) the Federal Reserve served its intended role of lender of last resort. C) the First Bank of the United States served its intended role of lender of last resort. D) the Second Bank of the United States served its intended role of lender of last resort. 21) Which of the following is NOT an entity of the Federal Reserve System? A) Federal Reserve Banks @m FDIC ) The Board of Governors D) The Federal Advisory Council 22) Which of the following is M a possible operating target? A) non-borrowed reserves 7 My B) Monetary base C) Federal funds interest rate (mscount rate i\/ 23) The charter of the First Bank of the United States was A) not renewed because Congress failed to over-ride a Presidential veto B) allowed to expire because Congress and the President decided to take no action to renew the Charter @Qt renewed because Congress failed to renew the charter by a single vote \ , 15) not renewed because Congress declined to renew the charter by a unanimous vote 24) Decisions by depositors to increase their holdings of t otbanks to hold excess reserves will result in a, 3; .ueipansion of deposits than the simple model predicts. A) currency; larger B) deposits; larger C) de osits; smaller )cu ency; smaller . A»5 _ . - f 25) According to the Taylor rule the Fed should raise the federal funds interest rate when inflation the Fed's rams: or when real GDP the Fed's output target. A) drops below; drops below B i drops below; rises above C r rises above; drops below 46 _ . {Di I'lSCS above; rises above \4 26) CW last five weeks, the four-week moving average of initial claims has been A) J} under 300,000 F r r . ~_/’ B)just under 350,000 agjust over 300,000 D) just over 350,000 27) Suppose, While cleaning out its closets, a worker at the Federal Reserve Branch Bank in Memphis disoovers a painting of Elvis (medium: acrylic on velvet) that used to grace the walls of the conference roomaflSupposgurtfilger that, at a public auction, the bank sells the painting for $19.95. This sale will causebjmm in fire rrrirohgilagzlnflefieverything else held Constant. , ’ St, . ‘ ' ‘ A) an intersect 9.95 scum do w a; satin“. 8m t“ “it” , V - . o ‘- increasevt‘ici'l 9.95 ..§@ a decrease of$l9.95 D) a decrease ofrnore than $19.95 28) In the model of the money supply process, the depositors role in influencing the money supply is / represented by A) only the market interest rate. £11m currency ratio, excess reservo ratio and the market interest rate. J C) yonly the currency ratio. D) both the currency ratio and excess reserve ratio. - 29) In its press release of28 March 2006, the FOMC stated that "possible increases in resource utilization, in combination with the elevated prices of energy and other CQDdeiIies, have the potential to add to inflation pressures." This means that the FOMC believes increases in fi_ have the potential to lead to increases in core PPI; core CPI B) total PPI; core CPI C) total CPI; core CPI Ir ) core PP]; total CPI \ x 13) total PPI; total CPI '— 30) The National Banking Act of 1863 created which of the following financial regulatory agencies? A) The Securities and Exchange Commission (SEC). 43.33% Office ofthe Comptroller ofthe Currency (OCC). ijhe Federal Reserve System. D) The Federal Deposit Insurance Corporation (FDIC). A-7 ...
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This note was uploaded on 02/25/2011 for the course ECON 2035 taught by Professor Stahl during the Spring '08 term at LSU.

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2035_spring06_exam3 - 1 The money supply is related to the...

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