Recent Question

Which of the conclusions below is the least reasonable to draw "The damaging effect to the marketplace created by the persistence of heavy government borrowings is an ever-present concern for bond investors. A fear is that the solution to the government's seemingly insatiable appetite for funds will be debt monetization. As a result, most observers expect interest rates to remain historically high." 1. Debt monetization will a) raise bon ...

Other / Other 10 May 2016

The essence of the monetarist policy rule is to 56 1. Believers in the monetarist rule assert that a) lags are long and variable b) the economy can be stabilized by automatic mechanisms c) the central bank should keep the money supply growth constant d) all of the above 2. Suppose you are a monetarist and believe in the monetarist rule, which the monetary authorities appear to be following. If the economy begins to experience a slig ...

Other / Other 10 May 2016

The implication of this for monetary policy is that “And this is also a good time to engage in some serious infrastructure spending, which the U.S. badly needs in any case. The usual argument against public works as economic stimulus is that by the time you get around to repairing the bridges ……” This clip was written in October of 2008, when the world was dealing with the big 2008 financial crisis. The next two qu ...

Other / Other 10 May 2016

What level of seigniorage is the government currently enjoying 1. "The chairman of the Federal Reserve Board stated that 'I remain concerned that economic growth will run into constraints if job growth continues. If some slowdown doesn't bring labor demand into line with its sustainable supply, _____ is a real danger and ______ economic policy may be necessary.'" The blanks are best filled with a) inflation; tighter b) inflation; easier ...

Other / Other 10 May 2016

Accelerated inflation is an alternative to taxation in this context because multiplier is 5, the income multiplier with respect to the money supply is 3, the real interest rate is 3%, the current budget deficit is $30b, the long-run real rate of growth is 2%, the current money supply is $200b, velocity is constant, and the nominal interest rate is 10%. 1. Inflation is a) less than 7% b) 7% c) 8% d) more than 8% 2. Money growth is ...

Other / Other 10 May 2016

What kind of intervention is being referred to 1. "Earlier in the week the central bank's traders intervened aggressively in the money market to push the yield on last week's Treasury bills sharply higher." What kind of intervention is being referred to ? The central bank a) sold bills b) bought bills c) announced an easier monetary policy d) raised the legal reserve requirement 2. "Several government bond issues will raise $400 mil ...

Other / Other 10 May 2016

If a central bank believed in this link it would follow a policy of targeting 1. Suppose the money multiplier is 4, the income multiplier with respect to the money supply is 5, nominal income growth is 8% and the money supply is $400b. Seigniorage is a) $8b b ) $32b c) $6.4b d) none of the above 2. “The biggest criticism of central bankers is that their confidence in the link between the inflation rate and economic stability cau ...

Other / Other 10 May 2016

If firms paying employees monthly began paying 1. If firms paying employees monthly began paying them weekly, then the demand for money would a) rise and income would rise b) rise and income would fall c) fall and income would rise d) fall and income would fall 2. The quantity of money demanded varies a) directly with both prices and output b) inversely with both prices and output c) directly with prices and inversely with output ...

Other / Other 10 May 2016

You move some of your savings account balance into your checking account 1. Suppose the money multiplier is 6. What happens to the money supply if the Fed buys $3 billion of bonds? a) $3b increase b) $3b decrease c) $18b increase d) $18b decrease 2. Suppose you sell a bond to the Fed for $10,000 and deposit the proceeds in your checking account. As a direct result of this a) M1 and M2 both increase b) M1 increases and M2 decreases ...

Other / Other 07 May 2016

The introduction of daily interest saving accounts attracted a growing portion of funds 1. "The rapid expansion of M2 occurred as inflation rates were at historically high levels. Instead of saving, people spent and turned money over quickly in the banking system." What terminology do economists use to refer to "turning money over quickly in the banking system"? a) a high velocity b) a high multiplier c) a high money multiplier d) a h ...

Other / Other 07 May 2016