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36-81
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A.
A decrease in the money supply will lower the interest rate, increase investment
spending, and increase aggregate demand and GDP.
B.
A decrease in the money supply will raise the interest rate, decrease investment spending,
and decrease aggregate demand and GDP.
C.
An increase in the money supply will raise the interest rate, decrease investment
spending, and decrease aggregate demand and GDP.
D.
An increase in the money supply will lower the interest rate, increase investment
spending, and increase aggregate demand and GDP.
174.
Upon which of the following industries is a restrictive monetary policy likely to be
most effective?
175.
Assuming government wishes to either increase or decrease the level of aggregate
demand, which of the following pairs are not consistent policy
measures?
36-82
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Di ff ic ulty: 01 Easy
Learning Objective: 36-05 Identify the mechanisms by which monetary policy affects GDP and
the price level.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
176.
If the Federal Reserve authorities were attempting to reduce demand-pull inflation, the
proper policies would be to
177.
A contraction of the money supply
178.
The purpose of a restrictive monetary policy is to
179.
Monetary policy is expected to have its greatest impact on
180.
Which of the following actions by the Fed would cause the money supply to increase?
36-84
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
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: I
To pi c: Monetary Policy, Real GDP, and the Price Level
181.
Assume the economy is operating at less than full employment. An expansionary
monetary policy will cause interest rates to , which
will
investment spending.
182.
Which of the following best describes the cause-effect chain of a restrictive monetary
policy?
183.
If the economy were encountering a severe recession, proper monetary and fiscal
policies would call for
184.
If severe demand-pull inflation was occurring in the economy, proper government
policies would involve a government
185.
If the amount of money demanded exceeds the amount supplied, the
36-86
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
money-supply curve will shift to the right.
C.
interest rate will rise.
D. interest rate will fall.
186.
Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3, labels
indicate the levels of investment spending associated with
each curve, respectively. All
numbers are in billions of dollars. If the interest rate is 8 percent and the goal of the Fed is
full-employment output of
Qf, it should
36-87
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
Type: Graph
187.
Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels
indicate the levels of investment spending associated with
each curve, respectively. All
numbers are in billions of dollars. If the interest rate is 4 percent and the Fed desires to
reduce or eliminate demand-
pull inflation, it should
188.
Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels
indicate the levels of investment spending associated with
each curve, respectively. All
numbers are in billions of dollars. If the interest rate is 6 percent and the goal of the Fed is
full-employment output of
Qf, it should
189. The purpose of an expansionary monetary policy is to shift the
36-89
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Remember
Di ff ic ulty: 01 Easy
Learning Objective: 36-05 Identify the mechanisms by which monetary policy affects GDP and
the price level.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
190.
Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels
indicate the levels of investment spending associated with
each curve. All figures are in
billions. If the money supply is MS1 and the goal of the monetary authorities is full-
employment output Qf, they
should
36-90
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Di ff ic ulty: 01 Easy
Learning Objective: 36-05 Identify the mechanisms by which monetary policy affects GDP and
the price level.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
Type: Graph
191.
Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels
indicate the levels of investment spending associated with
each curve. All figures are in
billions. If aggregate demand is AD3 and the monetary authorities desire to reduce it to
AD2, they should
36-91
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Di ff ic ulty: 01 Easy
Learning Objective: 36-05 Identify the mechanisms by which monetary policy affects GDP and
the price level.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
Type: Graph
192.
Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels
indicate the levels of investment spending associated with
each curve. All figures are in
billions. Which of the following would shift the money supply curve from MS1 to MS3?
36-92
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
the price level.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
Type: Graph
193.
Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels
indicate the levels of investment spending associated with
each curve. All figures are in
billions. If the MPC for the economy described by the figures is 0.8,
36-93
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Di ff ic ulty: 01 Easy
Learning Objective: 36-05 Identify the mechanisms by which monetary policy affects GDP and
the price level.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
Type: Graph
194.
An increase in the money supply will
195.
All else equal, when the Federal Reserve Banks engage in a restrictive monetary
policy, the prices of government bonds usually
196.
All else equal, when the Federal Reserve Banks engage in an expansionary monetary
policy, the interest rates received on government bonds
usually
36-94
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
rise.
C.
remain constant.
D.
move in the same direction as the bonds' price.
197.
Money Supply
Money Demand
Interest Rate
Investment (at Interest Rate Shown)
$400
$600
2%
$700
$400
500
3
600
$400
400
4
500
$400
300
5
300
$400
200
6
200
Answer the question on the basis of the information in the table. The equilibrium interest
rate in this economy is
198.
Money Supply
Money Demand
Interest Rate
Investment (at Interest Rate Shown)
$400
$600
2%
$700
$400
500
3
600
$400
400
4
500
$400
300
5
300
$400
200
6
200
Answer the question on the basis of the information in the table. An interest rate of 2 percent
is not sustainable because
199.
Money Supply
Money Demand
Interest Rate
Investment (at Interest Rate Shown)
$400
$600
2%
$700
$400
500
3
600
$400
400
4
500
$400
300
5
300
$400
200
6
200
Answer the question on the basis of the information in the table. The amount of investment
that will be forthcoming in this economy at equilibrium
is
36-96
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Remember
Di ff ic ulty: 01 Easy
Learning Objective: 36-05 Identify the mechanisms by which monetary policy affects GDP and
the price level.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
Type: Table
200.
Money Supply
Money Demand
Interest Rate
Investment (at Interest Rate Shown)
$400
$600
2%
$700
$400
500
3
600
$400
400
4
500
$400
300
5
300
$400
200
6
200
Answer the question on the basis of the information in the table. Suppose the legal reserve
requirement is 10 percent and initially there are no
excess reserves in the banking system. If
the Fed wished to reduce the interest rate by 1 percentage point, it would
201.
The price of government bonds and the interest rate received by a bond buyer are
36-97
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Di ff ic ulty: 01 Easy
Learning Objective: 36-05 Identify the mechanisms by which monetary policy affects GDP and
the price level.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
202.
A restrictive monetary policy is designed to shift the
203.
If the economy is operating in the relatively steep (upper) portion of its aggregate
supply curve, a reduction in the money supply will
204.
The sale of government bonds by the Federal Reserve Banks to commercial banks will
36-98
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
decrease aggregate supply.
C.
increase aggregate demand.
D.
decrease aggregate demand.
205.
Assume that the price level is flexible both upward and downward and that the Fed's
policy is to keep the price level from either rising or falling.
If aggregate supply increases
in the economy, the Fed
206.
If the demand for money increases and the Fed wants interest rates to remain
unchanged, which of the following would be appropriate policy?
36-99
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
the price level.
Test Bank: I
To pi c: Monetary Policy, Real GDP, and the Price Level
207.
The current (2016) chairperson of the Board of Governors of the Federal Reserve
System is
208.
In recent years, the Federal Reserve has
209.
From September 2007 to April 2008, the Fed lowered the federal funds rate from 5.25
percent to 2 percent in a series of steps. The Fed's actions
were largely in response to
210.
In an effort to stabilize the banking sector and keep banks lending, from October 2008
to September 2009, the Fed
211.
Which of the following best describes the effect of the zero interest rate policy
implemented in December 2008?
212.
In response to the zero lower bound problem,
