Chapter 10 Mishkin (10)

8/10/2019 Chapter 10 Mishkin (10)

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Macreconomics: Policy and Practice(Mishkin)

Chapter 10 Monetary Policy and Aggregate Demand

10.1 The Federal Reserve and Monetary Policy

1) There are no questions for this section.Answer:

10.2 The Monetary Policy urve

1) The MP curve indicates the relationshi! "etween ######## and the ########.

A) ta$es% !rice level

&) the real interest rate% inflation rate) 'onetary !olicy% ( curve

*) all of the a"ove

+) none of the a"ove

Answer: &To!ic: 10.1 The MP urve

AA&: Reflective Thin,in-

2) The e$o-enous varia"le in the 'onetary !olicy curve is ########.

A) the !olicy !ara'eter /&) the real interest rate

) the autono'ous co'!onent

*) the federal funds rate

+) the inflation rateAnswer: +

To!ic: 10.1 The MP urveAA&: Analytical ,ills

) The endo-enous varia"le in the 'onetary !olicy curve is ########.

A) the !olicy !ara'eter /

&) the real interest rate

) the autono'ous co'!onent

*) the federal funds rate

+) the inflation rateAnswer: &

To!ic: 10.1 The MP urve

AA&: Analytical ,ills

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o!yri-ht 2012 Pearson +ducation (nc.


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) 3hen the Federal Reserve ########.

A) drains liquidity the federal funds rate falls

&) drains liquidity real interest rates fall) !rovides 'ore liquidity the federal funds rate falls

*) all of the a"ove

+) none of the a"oveAnswer:



4) The Federal Reserve ########.

A) sets the federal funds rate once a year&) controls the interest rate in the short run

) controls the interest rate in the lon- run

*) all of the a"ove+) none of the a"ove

Answer: &

To!ic: 10.1 The MP urveAA&: Reflective Thin,in-

5) The federal funds rate is ########.

A) a real interest rate&) set !eriodically "y on-ress

) a no'inal interest rate


Answer:


6) A central "an, can control the real interest rate !recisely so lon- as ######## re'ains

constant.A) the no'inal interest rate

&) 'onetary !olicy

) e$!ected inflation


Answer:


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7) (n the very short run ########.

A) the real interest rate will "e affected "y chan-es in the no'inal rate

&) 'onetary !olicy has an i''ediate effect on inflation) the inflation rate is deter'ined "y the federal funds rate

*) all of the a"ove

+) none of the a"oveAnswer: A



8) 3hich of the followin- is true a"out the Taylor !rinci!le9

A) it e$!lains the lin, "etween hi-her inflation and hi-her real interest rates

&) it is the foundation for an u!ward slo!in- MP curve) it reflects the !ractice of 'onetary !olicy

*) all of the a"ove


Answer: *To!ic: 10.1 The MP urve


10) (f the central "an, did notfollow the Taylor !rinci!le an increase in inflation would lead to

a decrease in ########.A) the no'inal interest

&) the real interest rate

) a--re-ate out!ut*) all of the a"ove




11) (f the central "an, did notfollow the Taylor !rinci!le an increase in inflation would lead to

########.

A) a decrease in the no'inal interest rate

&) an increase in inflation) a decrease in a--re-ate e$!enditure

*) all of the a"ove

+) none of the a"oveAnswer: &





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12) (f e$!ected inflation rises 'onetary !olicy ########.

A) is rendered ineffective

&) 'ust "e ti-htened to !revent further increases in inflation and e$!ected inflation) will !revent any increase in the real interest rate

*) is desi-ned to increase the no'inal interest rate "y 'ore than the increase in e$!ected

inflation+) none of the a"ove

Answer: *


1) Autono'ous ti-htenin- of 'onetary !olicy involves ########.

A) raisin- interest rates and shiftin- the MP curve to the ri-ht&) lowerin- interest rates and shiftin- the MP curve to the left

) raisin- interest rates and shiftin- the MP curve to the left

*) lowerin- interest rates and shiftin- the MP curve to the ri-ht



1) Autono'ous easin- of 'onetary !olicy involves ########.A) raisin- interest rates and shiftin- the MP curve to the ri-ht

&) lowerin- interest rates and shiftin- the MP curve to the left

) raisin- interest rates and shiftin- the MP curve to the left

*) lowerin- interest rates and shiftin- the MP curve to the ri-ht+) none of the a"ove

Answer: *


14) A 'ove'ent alon- the MP curve ########.

A) i'!lies an auto'atic adust'ent of the interest rate

&) i'!lies an autono'ous adust'ent to the interest rate

) i'!lies an autono'ous adust'ent of a--re-ate de'and*) all of the a"ove


Answer: ATo!ic: 10.1 The MP urve




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15) A shift of the MP curve ########.

A) i'!lies an auto'atic adust'ent of the interest rate

&) i'!lies a direct !olicy action of the Federal Reserve) does not alter the relationshi! "etween inflation and the interest rate

*) all of the a"ove

+) none of the a"oveAnswer: &



16) The MP curve 'ay "e used to re!resent ########.

A) 'ove'ents of the real interest rate as a direct !olicy action of the Federal Reserve

&) 'ove'ents of the real interest rate that are inde!endent of direct Federal Reserve action) how the real interest rate is related to the inflation rate

*) all of the a"ove


Answer: *To!ic: 10.1 The MP urve


17) The MP curve 'ay "e used to re!resent how ########.

A) 'ove'ents of the inflation rate are deter'ined "y the real interest rate&) 'onetary !olicy res!onds to chan-es in the real interest rate

) 'ove'ents of the real interest rate are related to the inflation rate

*) all of the a"ove




18) A decision to increase the !ara'eter / in the MP curve is an e$a'!le of ########.

A) autono'ous easin-&) leftward 'ove'ent alon- the curve

) ri-htward 'ove'ent alon- the curve

*) endo-enous res!onse

+) autono'ous ti-htenin-Answer: +



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20) &efore the financial crisis of 2006 inflation was on the rise. Accordin- to the MP curve this

would lead to ########.

A) an increase in the real interest rate&) an u!ward shift of the MP curve if !olicy'a,ers o!ted for autono'ous ti-htenin-

) a decrease in a--re-ate out!ut


Answer: *


21) As the financial crisis "eca'e 'ore severe in 2007 the Federal Reserve undertoo, a;n)

######## of 'onetary !olicy an effect of which is to ######## inflation.A) contraction% raise

&) easin-% raise

) contraction% lower

*) easin-% lower+) none of the a"ove



22) Throu-hout 2007 inflation and the real interest rate declined to-ether. The cause is a

co'"ination of ########.

A) 'onetary !olicy easin- and declinin- autono'ous s!endin-

&) declinin- autono'ous s!endin- and 'ove'ent alon- a fi$ed MP curve) 'onetary !olicy ti-htenin- and inversion of the MP curve

*) increased -overn'ent s!endin- and 'ove'ent alon- a fi$ed MP curve

+) none of the a"oveAnswer: A



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MP Curve

2) Referrin- to the -ra!h a"ove a 'ove'ent fro' !oint < to !oint ( 'i-ht re!resent ########.A) the increase in the inflation rate that occurs when the real interest rate rises

&) the auto'atic res!onse of 'onetary !olicy to an increase in the inflation rate

) an autono'ous ti-htenin- of 'onetary !olicy

*) any of the a"ove+) none of the a"ove

Answer: &


2) =n the -ra!h a"ove which !air of !oints "est re!resents the i'!acts in the >. . of the

financial crisis and !olicy res!onse fro' 2006 throu-h 20079A) < to (

&) ? to @) ( to

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Chapter 10 Mishkin (10)