Econ 1040 final exam Ohio University

Which of the following provides evidence that the federal reserve system is actually politically insulated

the fed governors are appointed for 14-year term and cannot be reappointed

all of the following are tools available to the fed for controlling the money supply except

taxes

which of the following represents the lending capacity of an individual bank

total reserves-required reserves

suppose the banks in the federal reserve system have 200 billion in transactions accounts, the required reserve ratio is 0.15, and there are no excess reserves in the systems. if the required reserve ratio is changed to 0.10, the amount of excess reserves would be

positive 10 billion

Suppose all of the banks in the federal reserve system have 100 billion in transactions accounts, the required reserve ratio is 0.25, and there are no excess reserves in the system . if the required reserve ratio is changed to 0.20 the total lending capacity of the system is increased by

25 billion

When the fed raises the discount rate, all of the following results except

it expands the lending capacity of the banking

which of the following is the principal mechanism used by the federal reserve to directly alter the reserves of the banking system?

open market operations

when the fed buys bonds from the public, it

increases the flow of reserves to the banking system

if the annual interest rate printed on the face of a bond is 12%, the face value of the bond is 1,000, and the current market price of the bond is 1,200, what is the current yield on the bond?

10%

if the fed wished to increase the money supply, it could

lower the discount rate

in order to increase the money supply the fed can

lower the reserve requirement, increase the discount rate, or buy bonds.

if the fed buys 25 billion of US bonds in the open market and the reserve requirement is 20 percent, M1 will eventually

increase by 125 billion

currency held by the public, balances in transaction accounts, plus balances in most savings accounts and money market mutual funds are the

money supply (M1)

the speculative transactions and precautionary demands for money added together give the

market supply curve for money

money held to take advantage of future financial opportunities is the

speculative demand for money

the fed can change the equilibrium rate of interest by changing

reserve requirements or the discount rate, or through open market operations

if the fed's objective is to stimulate the economy, which of the following gives the correct sequence of events?

the money supply increases, interest rates decrease, investments increase, and AD increases

A monetary stimulus is designed to shift the

AD curve to the right

when the money market is in equilibrium in the liquidity trap

an increase in the money supply does in affect interest rates

which of the following groups believes monetary policy to be effective for fighting inflation but not for changing real output

monetarists

the equation of exchange can be stated as

MV=PQ

if a lender desires to earn a real return of 3 percent on a loan and the anticipated rate of inflation is 2 percent, the lender should charge a

Nominal interest rate

According to Keynesians, fiscal policy affects

aggregate spending, real output, and real interest rates, with possible effects on prices and nominal interest rates

assuming the aggregate supply curve is upward sloping, which of the following is most likely to occur i the fed pursues restrictive monetary policy

the equilibrium price level and output will both decrease

assume the aggregate supply curve is horizontal and the economy is experiencing a recession. Which of the following is most likely to occur if the fed pursues expansionary monetary policy

the equilibrium output will increase but the price level will stay the same until full employment is reached

Given a vertical aggregate supply curve, which of the following is most likely to occur if the fed pursues restrictive monetary policy?

the equilibrium price level will decrease but output will stay the same

which of the following characterizes stagflation

an increase in both unemployment and inflation

which of the following shifts, ceteris paribus, will cause lower rates of both unemployment an inflation

an increase in aggregate demand

a rightward shift in aggregate demand will cause an increase in output and price level if aggregate supply is Upward-shifting to the right

aggregate supply is upward shifting to the right

an aggregate supply curve that is always vertical is most consistent with which of the following views of the economy

Monetarist

according to the hybrid, or consensus, view of aggregate supply, the chance for an aggregate demand increase to cause inflation accelerates as

the economy moves towards capacity

Higher unemployment and higher inflation rates will most likely occur with

a rightward shift of the phillips curve

an increase in the misery index would definitely result from

a movement along the phillips curve toward greater unemployment

according to supply-side theorists, a decrease in marginal tax rates will provide incentive to

produce more

tariffs and quotas on imported goods shift the

AS curve to the left

A tax cut can be characterized as

Both fiscal and supply-side policy

fiscal policy includes all of the following except

interest rate increases

monetarists believe that an increase in the money supply shifts the aggregate

Demand curve to the right

Which of the following is an example of supply-side policy

tax incentives for business investment

which of the following is a Keynesian approach for dealing with a recession

increase government expenditure

infinite number of spending cycles is the

multiplier

which of the is a monetary policy action to eliminate a recession

a decrease in the discount

which of the following is a supply-side policy action to eliminate a recession

increased investment in infrastructure

which of the following is both a supply-side and a fiscal policy tool during a recession

tax cuts

which if the following is true about stagflation

It can be correct by polices that increase aggregate supply

which of the following concepts does not represent basic trade-offs faced

fine-tuning

if the data collected by policy makers overstate inflation, this is an example of

a measurement problem

the idea that no one knows for certain the shape of the aggregate supply curve contributes to

design problems

which of the following is the appropriate order of policy responses

recognition, response design, implementation

if the annual interest rate printed on the face of a bond is 12 percent, the face value of the bond is 1,000, and the current market price of the bond is 1200, what is the current yield on the bond

10%