Homework 5 Flashcards
Which of the following is NOT considered to be a goal of monetary policy? A) fair wages B) high unemployment C) economic growth D) price stability
A) fair wages
Most economists believe that a zero rate of unemployment:
A) is obtainable with the correct policy
B) would result in a better functioning economy
C) is inconsistent with a well-functioning economy
D) is obtainable only if the inflation rate is also zero
C) is inconsistent with a well-functioning economy
Rates of inflation in the hundreds or thousands of percent per year are known as: A) super inflation B) megainflation C) hyperinflation D) overinflation
c) hyperinflation
John Smith leaves his job in New York to go to California in hopes of finding a better one. If he is unemployed while searching for a job in California, economists would consider him to be: A) frictionally unemployed B) structurally unemployed C) cyclically unemployed D) naturally unemployed
A) frictionally unemployed
Sally Jones lost her job at a steel company because of a permanent decline in the demand for steel. She is considered by economists to be: A) naturally unemployed B) cyclically unemployed C) structurally unemployed D) frictionally unemployed
5) structurally unemployed
When financial markets and institutions are not efficient in matching savers and borrowers:
A) interest rates fall, which discourages saving even further
B) interest rates fall, which discourages investment even further
C) resources are lost
D) investment rises
C) resources are lost
Interest rate fluctuations:
A) are usually not considered to be of much importance and are largely ignored by the Fed
B) have the paradoxical effect of increasing the rate of economic growth
C) make it difficult for households and firms to plan for the future
D) have largely been eliminated by the Fed during the past two decades
C) make it difficult for households and firms to plan for the future
A rising dollar makes US goods
A) more expensive abroad and increases the volume of US exports
B) less expensive abroad and increases the volume of US exports
C) less expensive abroad and decreases the volume of US exports
D) more expensive abroad and decreases the volume of US exports
D) more expensive abroad and decreases the volume of US exports
In order to increase its target for the federal funds rate, the Fed would normally: A) conduct open market sales B) conduct open market purchases C) increase the discount rate D) increase reserve requirements
A) conduct open market sales
As a result of an open market purchase, bank reserves: A) rise and interest rates fall B) fall and interest rates fall C) and interest rates both rise D) increase reserve requirements
A) rise and interest rates fall
An open market purchase: A) increases the monetary base B) decreases the monetary base C) increases the federal funds rate D) is another name for discount loan
A) increases the monetary base
An open market purchase:
A) decreases the price of Treasury securities and also decreases their yield
B) increases the price of Treasury securities and decreases their yield
C) increases the price of Treasury securities and also increases their yield
D) decreases the price of Treasury securities and increases their yield
B) increases the price of Treasury securities and decreases their yield
If the account manager finds that the current level of bank reserves is greater than the desired level indicated in the most recent directive from the FOMC, he will:
A) order banks to reduce their reserves
B) order banks to raise their interest rates in an attempt to get them to loan out more of their reserves
C) conduct an open market purchase
D) conduct an open market sale
D) conduct and open market sale
A matched sale-purchase transaction is also known as a: A) reverse repo B) discount loan C) put option D) federal funds loan
A) reverse repo
Reserve requirements are changed:
A) more frequently than the discount rate is changed, less frequently than open market operations are conducted
B) more frequently than the discount rate is changed, more frequently than open market operations are conducted
C) more frequently then open market operations are conducted, but less frequently than the discount rate is changed
D) less frequently than open market operations are conduction and less frequently than the discount rate is changed
D) less frequently than open market operations and less frequently than the discount rate is changed
