##### Reference no: EM131027546

**Question 1**

Which of the following measures of the money supply is currency included in? (Choose all that apply)

MV

MB

M2

M1

**Question 2**

Assume that all wages and prices are completely and immediately flexible. If the growth rate of the money supply is 8%, the growth rate of the velocity of money is 4% and inflation is 6%, what is the Solow growth rate?

Hint: enter your answer without a % sign

Example: if the answer is 4%, enter 4.

**Question 3**

If there is a long war in a country, the _______ curve will shift ______.

Solow growth, left

SRAS, up/left

SRAS, down/right

Solow growth, right

AD, left

AD, right

**Question 4**

What two things do we allow for in order to include an SRAS curve in our AD-AS model? (Choose all that apply) inflation does not change

wages are sticky

prices are sticky

taxes are adjusted for inflation

**Question 5**

All of the following are examples of the kind of shock that primarily led to the Great Depression EXCEPT

Smoot-Hawly tariff act

banks failed which led to fewer banks and less investment

the Fed decreased the money supply

stock prices decreased and consumers reduced their consumption

**Question 6**

All of the following are money EXCEPT

debit cards

checks

credit cards

currency

**Question 7**

Assuming a bank only keeps enough of its reserves to meet its reserve requirement, how much money is created when a bank receives a deposit from an individual of $8000 with a 20% reserve requirement.

Hint: enter your answer without a comma or $ sign.

Example: if the answer is $44,000 enter 44000 as your answer.

**Question 8**

Assuming a bank only keeps enough of its reserves to meet its reserve requirement, how much money is created when the Fed purchases $14,000 worth of bonds from a bank (this means they deposit $14,000 in that bank's reserve account) and there is a 10% reserve requirement?

Hint: enter your answer without a comma or $ sign.

Example: if the answer is $44,000 enter 44000 as your answer.

**Question 9**

If the Fed buys US government bonds, what effects does this have on the US economy?

money supply increases; interest rates increase; US economy is restrained

money supply increases; interest rates increase; US economy is stimulated

money supply increases; interest rates decrease; US economy is restrained

money supply decreases; interest rates increase; US economy is stimulated

money supply decreases; interest rates increase; US economy is restrained

money supply decreases; interest rates decrease; US economy is restrained

money supply increases; interest rates decrease; US economy is stimulated

money supply decreases; interest rates decrease; US economy is stimulated

**Question 10**

How many regional Fed banks are there?

**Question 11**

The monetary policy tool where the Fed lends directly to banks is

velocity modification

discount lending

reserve requirement

open market operations

**Question 12**

All of the following are true EXCEPT

the monetary policy target of the Fed is the 5-year US Treasury interest rate

the Fed cannot force businesses to borrow

the Fed operates by changing the value of MB

the Fed cannot force banks to lend

**Question 13**

What is the best case scenario for the Fed?

counter a positive SRAS shock

counter a negative real shock

counter a negative AD shock

counter a positive real shock

**Question 14**

If the Fed stimulates the economy too much, what problem will the economy have?

high inflation

high economic growth

low economic growth

low inflation

**Question 15**

All of the following make monetary policy difficult to conduct EXCEPT

it takes a long time for monetary policy implemented in New York to affect other parts of the country

there are lags associated with monetary policy

the Fed operates in real time with backwards looking data

the Fed has incomplete control of the money supply

**Question 16**

All of the following contribute to making the tightening of monetary policy less painful EXCEPT

individuals and firms in the economy lower their inflation expectations faster

the SRAS curve moves down more slowly

the Fed possesses a high degree of credibility

the Fed announces their intentions

**Question 17**

All of the following are true about the Fed responding to the housing bubble EXCEPT

the Fed should have tightened subprime lending regulations

the widely predicted severe consequences of the housing bubble popping should have prompted a tightening of monetary policy

depressing the whole economy is a crude way of correcting the prices of one asset class

it is difficult to identify bubbles until after the fact

Use the following information for the next 10 questions. You should draw a graph that depicts the situation below and use your picture to answer the questions.

Assume that wages and prices are sticky and that we start at a long-run equilibrium. Assume that at this initial point, the growth rate of the money supply is 5%, the growth rate of the velocity of money is 4% and that the real economic growth rate is 3%.

Now assume that the Federal Reserve has decided to increase the growth rate of the money supply by 6% and that the Federal Reserve leaves the growth rate of the money supply at this elevated rate.

**Question 18**

What curves do you have in your graph? (Choose all that apply)

AD

SRAS

SGC

MTS

**Question 19**

What is the inflation rate at the initial long run equilibrium (the point where we start)?

Hint: enter your answer without a % sign

Example: if the answer is 2%, enter 2

**Question 20**

What is the value of expected inflation for the SRAS curve before the Federal Reserve increases the growth rate of the money supply?

Hint: enter your answer without a % sign

Example: if the answer is 2%, enter 2

**Question 21**

When the Federal Reserve decides to increase the growth rate of the money supply, the ______ curve shifts ______.

SGC; left

AD; right

SRAS; down/right

SRAS; up/left

AD; left

SGC; right

**Question 22**

After the Federal Reserve increases the growth rate of the money supply, what is the growth rate of the velocity of money?

Hint: enter your answer with a % sign

Example: if the answer is 2%, enter 2

**Question 23**

After the Federal Reserve increases the growth rate of the money supply, what is the new total spending growth rate?

Hint: enter your answer with a % sign

Example: if the answer is 2%, enter 2

**Question 24**

After the Federal Reserve increases the growth rate of the money supply, what is the new real economic growth rate in your graph?

Hint: enter your answer with a % sign

Example: if the answer is 2%, enter 2

**Question 25**

After the Federal Reserve increases the growth rate of the money supply and we are at a new real economic growth rate and a new inflation rate (point 2), the ______ curve shifts ______.

SGC; left

SRAS, up/left

AD; right

SRAS; down/right

AD; left

SGC; right

**Question 26**

Now think about the point that the economy ends up at that is the new long run equilibrium.

What is the real economic growth rate?

Hint: enter your answer without a % sign

**Question 27**

Now think about the point that the economy ends up at that is the new long run equilibrium.

What is the inflation rate?

Hint: enter your answer without a % sign

Use the following information for the next 10 questions. You should draw a graph that depicts the situation below and use your picture to answer the questions.

Assume that wages and prices are sticky and that we start at a long run equilibrium. Assume that at this initial point, the growth rate of the money supply is 6%, the growth rate of the velocity of money is 5% and that the real economic growth rate is 4%.

Assume that there is a drop in consumption and investment such that causes total spending growth to drop by 5%.

Assume now that the Federal Reserve is going to try and counter this drop in consumption and investment through monetary policy, and that they increase the growth rate of the money supply by 9%.

**Question 28**

What curves are in your graph? (Choose all that apply)

SRAS

SGC

AD

MTS

**Question 29**

What is the inflation rate at the initial long run equilibrium (the point where we start)?

Hint: enter your answer without a % sign

Example: if the answer is 2%, enter 2

**Question 30**

What is the value of expected inflation for the SRAS curve before the Federal Reserve increases the growth rate of the money supply?

Hint: enter your answer without a % sign

Example: if the answer is 2%, enter 2

**Question 31**

When consumption and investment fall, which component of total spending growth is affected?

growth rate of the money supply

inflation

growth rate of the velocity of money

real economic growth rate

**Question 32**

When consumption and investment fall, the _____ curve shifts _____.

AD; left

SRAS; up/left

SGC; right

AD; right

SRAS; down/right

SGC; left

**Question 33**

After consumption and investment fall (and before Federal Reserve action), what is the inflation rate in your graph?

**Question 34**

When the Federal Reserve decides to increase the growth rate of the money supply, the ______ curve shifts ______.

SRAS; down/right

SGC; right

SGC; left

AD; right

SRAS; up/left

AD; left

**Question 35**

After Federal Reserve action, what is the growth rate of the velocity of money?

Hint: enter your answer without a % sign

Example: if the answer is 2%, enter 2

**Question 36**

When the Federal Reserve increases the growth rate of the money supply in this case, they stimulate the economy _______.

too much

too little

unable to determine

just right

**Question 37**

After Federal Reserve action, what is the real economic growth rate in your graph?

Hint: enter your answer without a % sign

Example: if the answer is 2%, enter 2