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348.
If the Fed reduces the interest paid on banks' reserves, it is trying to make banks hold
349.
The interest rate that banks charge one another for the loan of excess reserves is the
350.
Traditionally, the Fed often communicated its intentions to restrict or expand monetary
policy by announcing a change in its target for the
36-162
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
federal funds rate.
C.
discount rate.
D.
consumer price index.
351.
Before the financial crisis of 2008, if the Fed wanted to lower the Federal funds rate, it
352.
Before the financial crisis of 2008, when the Federal Reserve Banks decided to buy
government bonds from commercial banks and the general
public, the supply of reserves in
the federal funds market
36-163
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
Topic: Targeting the Federal Funds Rate
353.
Which of the following is not a result of policy actions taken by the Fed since the
financial crisis in 2008?
354.
As a result of policy actions taken by the Fed since 2008, it (the Fed) can no longer
expect to affect the federal funds rate through traditional open
market operations to alter the
overall amount of excess reserves in the banking system. This is because
355.
The interest rate that banks use as a reference point for interest rates on a wide range of
loans to businesses and individuals is the
36-164
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written consent of McGraw-Hill Education.
D. real interest rate.
356.
If the Federal funds rate
358.
Which of the following statements is correct?
359.
Before the financial crisis of 2008, if the Fed bought government securities in the open
market, it
360.
Since the financial crisis of 2008, the main tool of expansionary monetary policy used
by the Fed has been
36-166
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
D i f f i c u l t y : 02 Medium
Learning Objective: 36-04 Describe the federal funds rate and how the Fed directly influences
it.
Test Bank: II
Topic: Targeting the Federal Funds Rate
361.
As expansionary monetary policy tools, quantitative easing (QE) and traditional open-
market purchase differ in terms of the following, except
362.
Quantitative easing (QE) and traditional open-market purchase differ in that
36-167
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic: Targeting the Federal Funds Rate
363.
Before the financial crisis of 2008, restrictive monetary policy by the Fed involved
364.
The Fed, at the end of 2015, announced its intent to start "normalizing" monetary policy
and returning short-term interest rates to their normal
range of 3 percent or higher. Its
normalization plan had two major tools,
365.
Which of the following combinations of Fed actions would be most effective in
"mopping up" reserves away from the banking system?
36-168
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
nonbanks
B.
raising the interest paid on excess reserves and also doing "repos" with banks and
nonbanks
C.
reducing the interest paid on excess reserves and also doing "reverse repos" with banks
and nonbanks
D. raising the interest paid on excess reserves and also doing "reverse repos" with banks
and nonbanks
366.
According to the Taylor rule, if the target rate of inflation for the Fed is 2 percent and
real GDP rises by 1 percent above potential GDP, then the
Fed should
367.
According to the Taylor rule, if the inflation rate is one percentage point below the
target of 2 percent, then the Fed should
36-169
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
D i f f i c u l t y : 02 Medium
Learning Objective: 36-04 Describe the federal funds rate and how the Fed directly influences
it.
Test Bank: II
Topic: Targeting the Federal Funds Rate
368.
According to the Taylor rule, when real GDP is equal to potential GDP and the
inflation rate is equal to its target rate of 2 percent, the Federal
funds rate should be
369.
If real GDP is 2 percent below potential GDP and the inflation rate is 1 percent, then
according to the Taylor rule, the Fed should make the real
federal funds rate
370.
In the cause-effect chain linking changes in the banks' excess reserves and the resulting
changes in output and employment in the economy,
36-170
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written consent of McGraw-Hill Education.
A. a decrease in aggregate demand will increase output.
B.
an increase in the money supply will decrease the rate of interest.
C.
a decrease in excess reserves will increase the money supply.
D.
a decrease in the rate of interest will decrease aggregate demand.
371.
Changes in interest rates, ceteris paribus, cause a shift in
372.
The level of GDP, ceteris paribus, will tend to increase when
36-171
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic: Monetary Policy, Real GDP, and the Price Level
373.
The Federal Reserve can increase aggregate demand by
374.
Which of the following is the most accurate description of events when monetary
authorities increase the size of commercial banks' excess
reserves?
375.
Which of the following best describes what occurs when monetary authorities sell
government securities?
36-172
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
GDP.
B.
There is a decrease in the size of commercial banks' excess reserves, the money supply
decreases, and interest rates rise, thereby causing a
decrease in investment spending and
real GDP.
C.
There is a decrease in the size of commercial banks' excess reserves, the money supply
decreases, and interest rates rise, thereby causing an
increase in investment spending and
real GDP.
D.
There is an increase in the size of commercial bank reserves, the money supply increases,
and interest rates fall, thereby causing an increase in
investment spending and real GDP.
376.
If the Fed wants to maintain current interest rates, it would be buying government bonds
in the open market when
377.
An increase in the money supply, ceteris paribus, usually
36-173
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: II
Topic: Monetary Policy, Real GDP, and the Price Level
378.
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 numbers
are in billions of dollars. The interest rate and the level of investment spending in the
economy are at point D on the
investment demand curve. To achieve the long-run goal of a
noninflationary, full-employment output Qf in the economy, the Fed should try to
379.
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 numbers
are in billions of dollars. The interest rate and the level of investment spending in the
economy are at point B on the
investment demand curve. To achieve the long-run goal of a
noninflationary, full-employment output Qf in the economy, the Fed should
380.
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 numbers
are in billions of dollars. The interest rate and the level of investment spending in the
economy are at point C on the investment demand curve. To achieve the long-run goal of a
noninflationary, full-employment output Qf in the economy, the Fed should try to
381.
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. What is the desired level of investment spending in this economy if it is to
achieve a noninflationary,
full-employment level of real GDP?
382.
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 interest rate in the economy is 4 percent. What should the Fed do to achieve
a noninflationary, full-employment level of real GDP?
383.
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 equilibrium at the intersection of the aggregate supply curve
and aggregate demand curve AD3. What policy should the Fed pursue to achieve a
noninflationary, full-employment level of real GDP?
384.
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 X on the investment demand curve. Given these
conditions, what policy should the Fed pursue to achieve a noninflationary, full-employment
level of real GDP?
385.
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 Y on the investment demand curve. Given these
conditions, what policy should the Fed pursue to achieve a noninflationary, full-employment
level of real GDP?
