When the Fed purchases government securities from a commercial bank, the bank:
a. automatically becomes poorer.
b. loses equity in the Fed.
c. receives reserves that can be used to make additional loans.
d. loses its ability to make loans.
Question 2Which of the following is most likely to have contributed to better inventory management?
a. Stability in the market demand
b. Stability in the average price level
c. Perfect forecasting by the firms
d. Reduced variability in the input costs
e. Improvements in information technology and communication
Question 3Unlike demand, the longer the time suppliers have to respond to a change in price, the less elastic is the supply curve.
a. True
b. False
Indicate whether the statement is true or false
Question 4If the Federal Open Market Committee (FOMC) decides to expand the money supply, then:
a. it will issue directions to sell U.S. government securities, thus increasing the velocity of circulation of the money supply.
b. it will issue directions to purchase U.S. government securities, thus putting more reserves in the hands of banks.
c. it will order new Federal Reserve notes delivered to member banks.
d. it will raise the discount rate to member banks.
Question 5Which of the following factors have not contributed to the Great Moderation of real GDP in the U.S. over the past 20 years?
a. Better inventory management
b. Better macroeconomic policy
c. Greater availability of financial products for lending and borrowing
d. Imposition of a ceiling on interest rates
e. Smaller real shocks
Question 6When a 9 increase in price leads to a 6 increase in quantity supplied, supply is relatively inelastic.
a. True
b. False
Indicate whether the statement is true or false
Question 7When the Fed wants to expand the money supply through open market operations, it:
a. sells government securities.
b. purchases government securities.
c. increase the Fed Funds rate.
d. decrease reserve requirements.
Question 8To some economists, the Great moderation means:
a. a small change in real wages.
b. a low inflation rate.
c. a low unemployment rate.
d. low output growth variability.
e. low money supply growth.
Question 9When a 5 increase in price leads to an 8 increase in quantity supplied, supply is relatively inelastic.
a. True
b. False
Indicate whether the statement is true or false
Question 10If the Fed sells a U.S. government bond to a bank, what is the effect on the money supply?
a. It will increase.
b. It will not change.
c. It will decrease.
d. It will be uncertain.
Question 11A sudden technological breakthrough in an economy would:
a. have no impact on real GDP.
b. cause aggregate demand to fall.
c. lower the natural rate of unemployment.
d. increase the price level.
e. cause aggregate supply to rise.
Question 12Price elasticity of supply is a measure of the relative responsiveness of the change in price to a change in quantity supplied.
a. True
b. False
Indicate whether the statement is true or false
Quick Reply
