Chapter: Monetary Policy and the National Economy
Your Full Name:
Your Email Address: (required)
The Email address of an instructor to mail your quiz results:
1. The main reason the U.S. established a central bank was
a. a desire for a strong centralized financial authority.
b. to follow the conclusions of economic theory.
c. severe inflation after the Civil War.
d. disastrous experiences with financial panics.
2. Recent research on central bank independence suggests that
a. countries with more independent central banks have lower inflation rates.
b. countries with more independent central banks have higher inflation rates.
c. countries with less independent central banks have lower inflation rates.
d. countries with more independent central banks have higher unemployment rates.
3. Which of the following is correct?
a. The Fed has very good control over the money supply and bank reserves.
b. The Fed has very poor control over the money supply and bank reserves.
c. The Fed has very good control over bank reserves but not over the money supply.
d. The Fed has very good control over the money supply but not over bank reserves.
4. If the Fed sells a U.S. Treasury bill to a member of the public,
a. the banking system has less reserves and the money supply tends to fall.
b. the banking system has more reserves and the money supply tends to fall.
c. the banking system has less reserves and the money supply tends to grow.
d. the banking system has more reserves and the money supply tends to grow.
5. If the Fed decides to buy T-bills, it increases the demand for T-bills. How will this affect the price of T-bills and the interest rate?
a. T-bill prices fall and interest rates fall.
b. T-bill prices rise and interest rates rise.
c. T-bill prices rise and interest rates fall.
d. T-bill prices fall and interest rates rise.
6. A system that requires banks to keep 100 percent reserves
a. would reduce the Fed's ability to control the money supply.
b. would undermine the effectiveness of reserve requirement changes.
c. would increase the Fed's ability to control the money supply.
d. could be implemented with little change in bank policy.
7. Money demanded varies
a. inversely with both prices and output.
b. inversely with prices and directly with output.
c. directly with prices and inversely with output.
d. directly with both prices and output.
8. The figure below shows a money demand schedule. If real GDP decreases, the MD schedule will
a. shift outward.
b. shift inward.
c. become steeper.
d. become flatter.
9. The two principal determinants of the demand for money are
a. inflation and unemployment.
b. income and interest rates.
c. prices and wealth.
d. prices and income.
10. In the figure below, which panel shows the effect on the interest rate of a recession?
a.
b.
(c) 2003 South-Western, All Rights Reserved
webmaster