Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 33, Problem 3MCQ
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To identify:
The option that correctly states the
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The Fed's monetary policy instruments are _______.
A.
the core inflation rate and the quantity of money
B.
the quantity of money and the quantity of bank reserves
C.
the quantity of bank reserves and three interest rates
D.
the monetary base and the core inflation rate
the money supply of Freedonia this year is $150 billion nominal GDP is $750 billion .assuming that velocity of money is stable. real GDP gross 2%this year. and money supply does not change what are the velocity, price level, and inflation rate
What is the expected impact of a decline in the money supply to the US economy?
A.
Higher aggregate prices (inflation)
B.
Lower aggregate prices (deflation)
C.
There is no general relationship between the money supply and inflaton
Chapter 33 Solutions
Foundations of Economics (8th Edition)
Ch. 33 - Prob. 1SPPACh. 33 - Prob. 2SPPACh. 33 - Prob. 3SPPACh. 33 - Prob. 4SPPACh. 33 - Prob. 5SPPACh. 33 - Prob. 6SPPACh. 33 - Prob. 7SPPACh. 33 - Prob. 8SPPACh. 33 - Prob. 9SPPACh. 33 - Prob. 10SPPA
Ch. 33 - Prob. 11SPPACh. 33 - Prob. 1IAPACh. 33 - Prob. 2IAPACh. 33 - Prob. 3IAPACh. 33 - Prob. 4IAPACh. 33 - Prob. 5IAPACh. 33 - Prob. 6IAPACh. 33 - Prob. 7IAPACh. 33 - Prob. 8IAPACh. 33 - Prob. 9IAPACh. 33 - Prob. 10IAPACh. 33 - Prob. 11IAPACh. 33 - Prob. 12IAPACh. 33 - Prob. 1MCQCh. 33 - Prob. 2MCQCh. 33 - Prob. 3MCQCh. 33 - Prob. 4MCQCh. 33 - Prob. 5MCQCh. 33 - Prob. 6MCQCh. 33 - Prob. 7MCQ
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- 28) When the Fed raises the federal funds rate A) the value of the dollar rises on the foreign exchange market. B) consumption increases. C) net exports increase. D) the value of the dollar falls on the foreign exchange market. 29) An inflation rate targeting rule A) reduces uncertainty about monetary policy. B) means that the inflation rate must exceed 5 percent in order for the rule to be effective. C) has been adopted the by the Fed in response to the financial crisis of 2008-2009. D) will not work if the Fed continues to sue open market operations.arrow_forwardWhat is the tradeoff that the Fed faces in the short run? In the short run, the Fed faces a tradeoff between ________. A. the nominal interest rate and the real interest rate B. monetary aggregates and credit aggregates C. short-term interest rates and long-term interest rates D. inflation and unemploymentarrow_forwardThe Fed's mandated goals are "maximum employment, stable prices, and moderate long-term interest rates." Explain the harmony among these goals in the long run. In the long run, ________. A. increases in monetary aggregates create a positive output gap and price stability, maximum employment, and close-to-zero nominal interest rates B. low nominal interest rates bring maximum employment, stable prices, and eliminate structural unemployment C. price stability brings maximum sustainable potential GDP growth, maximum employment, and a nominal interest rate close to the real interest rate D. price stability brings maximum sustainable potential GDP growth, unemployment below the natural rate, and nominal interest rates that rise slowlyarrow_forward
- What is the relationship between the monetary base and the Fed's balance sheet? The monetary base is _______. A. equal to the U.S. government securities held by the Fed, which are Fed assets B. the Fed's total liabilities C. equal to currency, which is a liability of the Fed D. the Fed's total assetsarrow_forward1. How do you think Fed policy might change if it included energy and food prices in its measure of the price level? 2. What two features of the Indian economy meant that an increase in rice prices was likely to spread through the economy and influence the overall inflation rate?arrow_forwardThe following data come from FRED, a database maintained by the St Louis Fed. According to FRED, Real GDP in 2009 was 97.5% of Real GDP in 2010. If so, then the inflation rate from 2009 should be. less than predicted by the Quantity Theory of Money because the Velocity of Money was slightly faster in 2010 than in 2009. Year M2 Nominal GOP 2009 $8.408 $14.45T % and that is slightly 2010 $8.618 $14.99T Type your numeric answer and submitarrow_forward
- Why Inflation is referred as monetary phenomena. explain using graphsarrow_forwardIf the Fed unexpectedly shifts to a more restrictive monetary policy, which of the following will most likely occur in the short run? a. An increase in inflation b. An increase in real GDP c. An increase in unemploymentarrow_forwardWhat would likely be the short-term impact on a country's inflation rate if the central bank significantly increases the money supply? A. The inflation rate would decrease. B. The inflation rate would remain unchanged. C. The inflation rate would increase. D. The inflation rate would initially increase, then sharply decrease.arrow_forward
- Let's assume that in our economy money supply is $15 billion, Velocity (V) is 5, and Output (Y) is $70 billlion in 2019. The base year is 2018. A. Calculate the price level (P) in this economy. B. What can you say about about inflation rate between 2018 and 2019. C. Calculate the money supply in this economy if we want inflation to be zero (0). D. If in 2021 this economy grows by 10% and money supply increases by 15%, what would be the inflation rate? Foarrow_forwardIf the Fed decides to leave the federal funds rate target range unchanged, we would expect _______. A. deflation to occur and the unemployment rate to increase B. the recessionary gap to increase C. potential GDP to increase and the full-employment quantity of labor to increase D. inflation to increase and the unemployment rate to decreasearrow_forwardHolding money demand constant, if the Fed pursues loosemoney and increase money supply, which will decrease? a. Real interest rate b. Price level c. Velocity of money d. Seasonal employmentarrow_forward
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