Title R16 Monetary and Fiscal Policy.pdf ✅

Question #1 of 95 Question ID: 1204740 Which of the following statements about the demand for and supply of money is least accurate? A) As the interest rate rises, the supply of money also rises. B) As gross domestic product rises, the demand for money balances also rises. C) As in ation rises, the demand for money by households and businesses also rises. Question #2 of 95 Question ID: 1204729 The amount of money a commercial bank has available to lend is known as: A) excess reserves. B) fractional reserves. C) required reserves. Question #3 of 95 Question ID: 1204798 Arguments for being concerned about the size of a scal de cit least likely include: A) Ricardian equivalence. B) a reduction in long-term economic growth. C) the crowding-out e ect. Question #4 of 95 Question ID: 1204753 A country is experiencing a core in ation rate of 7% during a recessionary period of real GDP growth. If the central bank has a single mandate to achieve price stability and uses in ation targeting with an acceptable range of zero to 4%, its monetary policy response is most likely to decrease: A) GDP growth in the short run. B) short-term interest rates. C) the foreign exchange value of the country’s currency.
Question #5 of 95 Question ID: 1204795 Robert Necco and Nelson Packard are economists at Economic Research Associates. ERA asks Necco and Packard for their opinions about the e ects of scal policy on real GDP for an economy currently experiencing a recession. Necco states that real GDP is likely to increase if both government spending and taxes are increased by the same amount. Packard states that if both government spending and taxes are increased by the same amount, there is no expected net e ect on real GDP. Are the statements made by Necco and Packard CORRECT? Necco Packard A) Incorrect Correct B) Correct Incorrect C) Incorrect Incorrect Question #6 of 95 Question ID: 1204774 Central banks that are able to de ne how in ation is computed and determine its desired level are best described as having: A) operational independence. B) transparency. C) target independence. Question #7 of 95 Question ID: 1204722 A distinction between scal policy and monetary policy is that scal policy: A) concerns taxes and government spending, while monetary policy concerns the money supply. B) is typically expansionary, while monetary policy is typically contractionary. C) is aimed at promoting economic growth, while monetary policy is aimed at promoting price stability. Question #8 of 95 Question ID: 1204791 The term "automatic stabilizers" refers to: A) changes in taxes and expenditure programs legislators automatically enact in response to changes the level of economic activity in order to smooth economic cycles.
B) government expenditures and tax receipts that are required to balance over the course of the business cycle, although they may be out of balance in any single year. C) increases in transfer payments and decreases in tax revenues that result from an economic contraction without new legislation. Question #9 of 95 Question ID: 1204775 If a country's economy is growing at an unsustainably rapid rate and the central bank decreases its target overnight interest rate, the country's: A) long-term rate of economic growth will increase. B) expected rate of in ation is likely to decline. C) in ation rate is likely to increase. Question #10 of 95 Question ID: 1204811 Which one of the following Federal Reserve monetary policies, when pursued in line with the U.S. government's scal policies, would help increase aggregate demand during a period of high unemployment? A) The sale of bonds by the Fed. B) An increase in the reserve requirements for nancial institutions. C) A decrease in the discount rate. Question #11 of 95 Question ID: 1204806 The country of Zurkistan is experiencing both high interest rates and high in ation. The government passes laws that reduce government spending and increase taxes. It takes many months before interest rates fall and in ation is reduced. This is an example of: A) action lag and automatic stabilizers. B) impact lag in discretionary scal policy. C) recognition lag in discretionary scal policy. Question #12 of 95 Question ID: 1204730
On January 5, the U.S. Federal Reserve (the Fed) bought $10,000,000 of U.S. Treasury securities in the open market. At the time, the reserve requirement was 25%, and all banks had zero excess reserves. What is the potential impact of the Fed's purchase on the U.S. money supply? A) $10,000,000 increase. B) $40,000,000 increase. C) $25,000,000 decrease. Question #13 of 95 Question ID: 1204773 What are the three essential qualities an e ective central bank should possess? A) Independence, credibility, and transparency. B) Understandability, relevance, and reliability. C) Transparency, comprehensiveness, and consistency. Question #14 of 95 Question ID: 1204762 Assume the U.S. economy is undergoing a recession. In its e orts to stimulate the economy by trying to in uence short-term interest rates the Fed is most likely to take which two actions? A) Sell Treasury securities and increase bank reserve requirements. B) Buy Treasury securities and decrease bank reserve requirements. C) Sell Treasury securities and decrease bank reserve requirements. Question #15 of 95 Question ID: 1204792 When an economy dips into a recession, automatic stabilizers will tend to alter government spending and taxation so as to: A) reduce interest rates, thus stimulating aggregate demand. B) enlarge the budget de cit (or reduce the surplus). C) reduce the budget de cit (or increase the surplus). Question #16 of 95 Question ID: 1204790