Econ Quiz Unit 8

Question 1
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When the Fed sells bonds in the open market, we can expect:
Question 1Select one:
a.
bond prices and interest rates to fall.
b.
bond prices to rise and interest rates to fall.
c.
bond prices to fall and interest rates to rise. ●
d.
bond prices and interest rates to rise.
Question 2
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When the Fed sells bonds in the open market, we can expect the:
a.
exchange rate to rise and interest rates to fall.
b.
exchange rate and interest rates to rise. ●
c.
exchange rate to fall and interest rates to rise.
d.
exchange rate and interest rates to fall.
Question 3
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Holding all else constant, higher interest rates in the United States would ________ the demand for U.S.
dollars in the foreign exchange market. In turn, this will lead to a/an _______ in the exchange rate, and
subsequently, U.S. net exports would _______.
a.
decrease; decrease; rise
b.
increase; increase; fall ●
c.
increase; decrease; rise
d.
decrease; increase; fall
Question 4
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Which of the following result from a change in the money supply brought about by an open market
sale?
a.
lower interest rate, higher exchange rate, decreased demand for investment and net exports
b.
higher interest rate, higher exchange rate, decreased demand for investment and decreased demand for
net exports ●
c.
lower interest rate, lower exchange rate, increased demand for investment and net exports
d.
higher interest rate, lower exchange rate, decreased demand for investment and increased demand for
net exports
Question 5
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Question 6
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On October 12, 1987, the Dow Jones Industrial Average plunged 508 points, wiping out more than $500
billion in a few hours. How did the Fed respond to this drastic fall in the stock market index?
a.
The Fed responded precisely as it did when faced with a similar situation in 1929, that is, it deemed that
no action was necessary.
b.
To encourage the business community to invest in the stock market, the Fed announced that it will sell
federal securities to raise the interest rate.
c.
In an attempt to ward off a recession, the Fed announced that it will provide adequate liquidity, by
buying federal securities. ●
d.
The Fed provided long-term loans to those corporations that experienced significant decreases in their
stock value.
Question 7
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What are the three types of monetary policy lags?
a.
the recognition lag, the identification lag, and the implementation lag
b.
the recognition lag, the inflation lag, and the impact lag
c.
the recognition lag, the implementation lag, and the government lag
d.
the recognition lag, the implementation lag, and the impact lag ●
Question 8
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The problem of lags suggests that monetary policy should:
a.
respond swiftly to statistical reports of economic conditions in the recent past.
b.
respond to conditions expected to exist in the future. ●
c.
stagger its implementation of policies so that there will be an ongoing effect on the economy.
d.
not respond to changing economic conditions in the economy but instead rely on the economy’s self
correcting mechanism.
Question 9
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Which of the following statements is true if interest rates were zero?
a.
The demand for bonds increases because bonds will be a more attractive alternative to money.
b.
People will hold their wealth in the form of money rather than in bonds. ●
c.
Bonds and money will become perfect substitutes since both are non-interest earning assets.
d.
The supply of bonds will increase.
Question 10
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Which of the following equations correctly describes the quantity equation in terms of percentage rate
of change? ∆ means “change in.”
a.
% ∆M ÷ % ∆V = % ∆P ∞ % ∆Y
b.
% ∆M + % ∆V = % ∆P + % ∆Y ●
c.
% ∆M ÷ % ∆V = % ∆Y ÷ % ∆P
d.
% ∆M ∞ % ∆V = % ∆P ∞ % ∆Y

Econ Quiz Unit 8

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Question 1

Mark 1.00 out of 1.00

Question 1Select one:

bond prices and interest rates to fall.

bond prices to rise and interest rates to fall.

bond prices to fall and interest rates to rise. ●

bond prices and interest rates to rise.

Mark 1.00 out of 1.00

Question 2Select one:

exchange rate to rise and interest rates to fall.

exchange rate and interest rates to rise. ●

exchange rate to fall and interest rates to rise.

Mark 1.00 out of 1.00

Question 3Select one:

decrease; decrease; rise

increase; increase; fall ●

increase; decrease; rise

decrease; increase; fall

Mark 1.00 out of 1.00

Question 4Select one:

Mark 1.00 out of 1.00

Mark 1.00 out of 1.00

Question 6Select one:

Mark 1.00 out of 1.00

What are the three types of monetary policy lags?

Question 7Select one:

Mark 1.00 out of 1.00

Question 8Select one:

respond swiftly to statistical reports of economic conditions in the recent past.

respond to conditions expected to exist in the future. ●

Mark 1.00 out of 1.00

Which of the following statements is true if interest rates were zero?

Question 9Select one:

The supply of bonds will increase.

Mark 1.00 out of 1.00

Question 10Select one:

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