Site MapHelpFeedbackMultiple Choice Quiz
Multiple Choice Quiz
(See related pages)

1
Currently the U.S. Fed tries to influence economic activity
A)only in the long run by shifting aggregate supply
B)mostly in the short run by shifting aggregate demand
C)by establishing a clear inflation target at all times
D)by following a strict monetary growth rule
2
A central bank can stimulate economic activity
A)by strictly enforcing a specified inflation target
B)by massively selling government bonds
C)by shifting aggregate supply to the right through monetary expansion
D)only temporarily and at the cost of a higher price level in the future
3
The Fed's most likely response to an increase in the inflation rate is to
A)wait and see what happens next
B)lower interest rates in an effort to stimulate aggregate supply
C)increase short-term interest rates by selling Treasury bills
D)buy government bonds from banks to decrease their reserves
4
When making a policy change, the U.S. Fed generally announces a target for the interest rate that banks charge each other for loans,
A)which is called the federal funds rate
B)which is called the discount rate
C)but then often surprises financial markets by actually setting a different target
D)since a change in the interest rate is the most effective way to shift aggregate supply
5
According to the Taylor rule, a central bank should always set interest rates
A)in response to changes in the inflation rate
B)in response to changes in the output gap
C)in response to changes in both the output gap and the inflation rate
D)at 2% in real terms
6
The Fed can most effectively achieve a federal funds rate target by
A)maintaining a specified target for monetary growth
B)lowering the discount rate whenever the output gap decreases
C)buying or selling Treasury bills
D)withholding information about the desired target rate from financial markets
7
If a central bank wants to slow down economic activity it should
A)raise interest rates to reduce investment spending and shift aggregate supply to the left
B)buy Treasury bills from banks to affect bank reserves and therefore interest rates
C)conduct open market sales to lower spending on durable consumption and investment
D)be aware that the long run effect may be a permanent decrease in the level of potential GDP
8
Which of the following equations most accurately describes the Taylor rule?
A)πt = mt – yt + vt
B)πt = mt + yt – vt
C)mt = 0.04 + 2(ut – 0.055)
D)it = 2 + πt + 0.5(πt – π*t) + 0.5[100(Yt –Y*t)/Y*t]
9
The Taylor rule
A)is an activist monetary policy rule
B)suggests that the monetary growth rate should be decreased by 1% for every 1.5% increase in inflation
C)suggests that real interest rates should be increased by 0.5% for every 1% increase in inflation
D)all of the above
10
According to the Taylor rule, if the current inflation rate is 4.2%, output is 1.2% below the full-employment level, and the central bank's announced inflation target is 3%, at what level should the central bank set the nominal interest rate?
A)3%
B)4.2%
C)5.4%
D)6.2%





To learn more about the book this website supports, please visit its Information Center.
(c)2014 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Notice.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


DornbuschOnline Learning Center

Home > Chapter 9 > Multiple Choice Quiz