1) The Fed’s use of the ________ as an operating target in the 1970s resulted in
________ monetary policy
A) federal funds rate; countercyclical
B) federal funds rate; procyclical
C) M1 money supply; countercyclical
D) M1 money supply; procyclical
2) With a 10 percent interest rate on dollar deposits, and an expected appreciation of 7
percent over the coming year, the expected return on dollar deposits in terms of the
dollar is
A) 3 percent
B) 10 percent
C) 135 percent
D) 17 percent
3) Which of the following sequences accurately describes the evolution of the payments
system?
A) Barter, coins made of precious metals, paper currency, checks, electronic funds
transfers
B) Barter, coins made of precious metals, checks, paper currency, electronic funds
transfers
C) Barter, checks, paper currency, coins made of precious metals, electronic funds
transfers
D) Barter, checks, paper currency, electronic funds transfers
4) The data lag is
A) the time it takes for policy makers to obtain data indicating what is happening in the
economy
B) the time it takes for policy makers to be sure of what the data are signaling about the
future course of the economy
C) the time it takes to pass legislation to implement a particular policy
D) the time it takes for policy makers to change policy instruments once they have
decided on the new policy
E) the time it takes for the policy actually to have an impact on the economy
5) When the Federal Reserve engages in a repurchase agreement to offset a withdrawal
of Treasury funds from the Federal Reserve, the open market operation is said to be
A) defensive
B) offensive
C) dynamic
D) reactionary
6) Evidence suggests that a liquidity trap is possible when
A) real interest rates are at zero
B) real interest rates are at or just above zero
C) nominal interest rates are at zero
D) nominal interest rates are at or just above zero
7) When a member of the nonbank public withdraws currency from her bank account,
A) both the monetary base and bank reserves fall
B) both the monetary base and bank reserves rise
C) the monetary base falls, but bank reserves remain unchanged
D) bank reserves fall, but the monetary base remains unchanged
8) If the Fed expects currency holdings to rise, it conducts open market ________ to
offset the expected ________ in reserves
A) purchases; increase
B) purchases; decrease
C) sales; increase
D) sales; decrease