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386.
Refer to the graphs, in which the numbers in parentheses near the AD1, AD2, and AD3
labels indicate the level of investment spending associated
with each curve. All figures are
in billions. The economy is at point Z on the investment demand curve. Given these
conditions, what policy should the monetary authorities pursue to achieve a noninflationary,
full-employment level of real GDP?
387.
Refer to the graphs, in which the numbers in parentheses near the AD1, AD2, and AD3
labels indicate the levels of investment spending associated
with each curve. All figures are
in billions. A shift in the aggregate demand curve from AD3 to AD2 can be achieved by
Federal Reserve action
to
388.
The purpose of an expansionary monetary policy is to increase
36-183
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written consent of McGraw-Hill Education.
D. interest rates.
389.
Which of the following is a monetary policy intended to rein in inflation?
390.
Assume the economy faces high unemployment but stable prices. Which combination of
government policies is most likely to reduce
unemployment?
36-184
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written consent of McGraw-Hill Education.
Topic: Monetary Policy, Real GDP, and the Price Level
391.
The major problem facing the economy is high unemployment and weak economic
growth. The inflation rate is low and stable. Therefore, the
Federal Reserve decides to
pursue a policy to increase the rate of economic growth. Which policy changes by the Fed
would reinforce each other to achieve that objective?
392.
The major problem facing the economy is high unemployment and weak economic
growth. The inflation rate is low and stable. Therefore, the
Federal Reserve decides to
pursue a policy to increase the rate of economic growth. Which policy changes by the Fed
would tend to offset each other in trying to achieve that objective?
393.
Suppose the economy is at full employment with a high inflation rate. Which
combination of government policies is most likely to reduce the
inflation rate?
36-185
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written consent of McGraw-Hill Education.
B.
buy government securities in the open market, do bond repos, and decrease taxes
C.
sell government securities in the open market, do bond repos, and increase government
spending
D.
sell government securities in the open market, do bond reverse-repos, and cut
government spending
394.
A newspaper headline reads, "Fed Raises Discount Rate for Third Time This Year."
This headline indicates that the Federal Reserve is most
likely trying to
395.
If the Fed is trying to make interest rates go down, it wants
36-186
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written consent of McGraw-Hill Education.
the price level.
Test Bank: II
Topic: Monetary Policy, Real GDP, and the Price Level
396.
When the Federal Reserve acts to tighten money and credit in the economy, it is trying
to reduce
397.
Assume that the MPC is 0.75 and that the price level is "sticky." If the Federal Reserve
increases the money supply and investment spending
increases by $8 billion, then aggregate
demand is likely to
398.
What is one of the advantages of monetary policy over fiscal policy?
36-187
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written consent of McGraw-Hill Education.
D.
It can guarantee an expansion of aggregate demand when needed.
399.
Which of the following is considered an advantage of monetary policy compared to
fiscal policy?
400.
Compared to fiscal policy, monetary policy has a much shorter
401.
An interesting development that happened in late 2008, relating to the Fed and bank
reserves, was that the Fed
36-188
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written consent of McGraw-Hill Education.
A.
reduced the reserve ratio drastically.
B.
required banks to hold more excess reserves.
C.
started paying interest on the banks' reserves.
D. gave back all the reserves to the banks to hold as vault cash.
402.
In 2008, at the depth of the Great Recession, the Fed moved toward a ZIRP when it
aimed to keep the Federal funds rate between
403.
The ZIRP (zero interest rate policy) of the Fed led to the so-called zero lower bound
problem, which refers to the problem of
404.
The Fed's response to the zero lower bound problem was quantitative easing (or "QE"),
where the Fed buys large amounts of bonds in order to
405.
Which of the following statements about quantitative easing (or "QE") and open-market
406.
Which of the following is considered a limitation of monetary policy?
36-190
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written consent of McGraw-Hill Education.
A c c e ss ib i l i ty : Keyboard Navigation
Blooms: Understand
D i f f ic ul t y: 02 Medium
Learning Objective: 36-06 Explain the effectiveness of monetary policy and its shortcomings.
Test Bank: II
Topic: Monetary Policy: Evaluation and Issues
407.
Assume the Fed creates excess reserves in the banking system by buying government
bonds, but banks do not make more loans because economic
conditions are bad. This
situation is a problem of
408.
Monetary policy actions by the Fed are
409.
The use of monetary policy to shift aggregate demand to the right in a severe recession
is like
36-191
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written consent of McGraw-Hill Education.
C.
pulling on one's purse-strings.
D.
pushing the envelope.
410.
In the recent financial and economic crises, the economy fell into a so-called liquidity
trap, which means that
411.
Which of the following is not a reason why after the Great Recession, when the
recovery turned out to be very weak, economic policy in the U.S.
had to turn forcefully
toward fiscal policy?
412.
Other things equal, an improvement in the expected rate of net profit would
413.
Other things equal, an appreciation of the U.S. dollar would
414.
Other things equal, an increase in taxes on businesses will
36-193
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written consent of McGraw-Hill Education.
Learning Objective: 36-05 Identify the mechanisms by which monetary policy affects GDP and
the price level.
Test Bank: II
Topic: The Big Picture
415.
Other things equal, an increase in consumer wealth will
416.
If consumers and businesses are especially pessimistic, as in the Great Recession of
2007–2009, and do not want to borrow money from banks,
then the use of an expansionary
money policy is likened to
417.
Starting in 2014, the European Central Bank (ECB), along with a few other central
banks in Europe, implemented a strange monetary policy of
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