Recent Question

These politicians talk as though they expect a Third World nation to be able to attract large inflows 1. "Everyone loves the U.S. dollar these days and the fall in the current account deficit just added to its popularity." A fall in the current account deficit makes the dollar more popular because a) it signals that the interest rate is about to fall, attracting capital inflows b) other things equal, smaller current account deficits m ...

Other / Other 11 May 2016

What action would the Fed take if price increases did not slow 1. “The main reason the U.S. experienced very little inflation in the late 90s, despite full employment and low interest rates, was because …….” This clipping is best completed by a) of good fiscal policy b) of a tight monetary policy c) of high productivity growth d) weak labor unions 2. “Canada’s unemployment rate fell to its ...

Other / Other 11 May 2016

By conducting monetary policy as if we were on a fixed exchange rate 1. "Finally, there is the question of monetary policy and imported inflation. Under a fixed exchange rate, Canadian inflation would be much more closely tied to that of the U.S. Given the experience of the last few years, that may not be a bad thing." If a fixed exchange rate were adopted in this situation Canadian monetary policy would a) ease b) tighten c) remain unc ...

Other / Other 11 May 2016

Higher interest rates are anti-inflationary because they 1. "The truth is that recessions are almost always policy-induced. They are the product not of time or chance but of government action." Policy-induced recessions are created to a) fight inflation b) enhance growth c) avoid unemployment d) reduce the natural rate of unemployment 2. Years of high growth generally ____ inflation, which in turn prompts the Federal Reserve to ____ ...

Other / Other 10 May 2016

Why would easing the supply of liquidity not necessarily 1. “When the U.S. Federal Reserve Board cuts it’s interest rates, the stock market typically goes up.” What logic lies behind this observation? a) the lower interest rate increases the price of bonds b) at current earnings the return to holding stocks becomes higher than the return to holding bonds c) the Fed buys stock to make interest rates fall d) at lo ...

Other / Other 10 May 2016

The main reason the chairman of the Fed prefers to have price stability 1. "For example, the upward shift in the Phillips curve that occurred in the early 1970s followed several years in which policymakers allowed money growth to accelerate in an (ultimately vain) attempt to keep __________. The downward shift in the mid 1980s occurred only after policymakers demonstrated that they were willing to _________ to move the inflation rate lower. ...

Other / Other 10 May 2016

Bond prices jumped because if the deficit is reduced 1. "The bond market's benchmark security, the 30-year Treasury bond, rose $12.50 for every $1,000 face amount. The bond's yield ______ from _____ to 5.69%." The blanks are best filled with a) rose; 4.44% b) rose; 5.65% c) fell; 6.94% d) fell; 5.73% 2. "Some portfolio managers were forced to buy securities in the 10-year to 30-year sector to meet targeted returns for the month and to ...

Other / Other 10 May 2016

To be vigilant about inflation the central bank should 1. "In the longer term, however, things will be different. It is worth recalling that seigniorage is no longer being exercised by all those seigneurs - emperors, kings and imperial governments - who once possessed it. The reason is simple: seigniorage is such a tempting privilege that it always ends up being abused." The outcome of abusing seigniorage is a) high inflation b) high inte ...

Other / Other 10 May 2016

If monetary policy targets on an unemployment level less 1. If the rate of money growth increases in a fully-employed economy you should a) wait to see what happens b) buy bonds because their price should soon rise c) sell bonds because their price should soon fall d) not worry because bond prices should not change 2. If monetary policy targets on an unemployment level less than the natural rate of unemployment, then over time a ...

Other / Other 10 May 2016

Which of the following best describes a policy moving the economy to the left along a short-run Phillips curve 1. Rational expectations implies that a) the short run Phillips curve becomes vertical b) people no longer persistently over- or under-estimate inflation c) the short run trade-off of inflation versus unemployment disappears d) movements up the long-run Phillips curve are faster than movements down it 2. To be successfu ...

Other / Other 10 May 2016