Recent Question

These two factors would typically cause producers to 1. "The central bank warned about a possible 'collision' in the future between rising wages and prices and its hold-the-line monetary policy." The result of this collision will be a) rising inflation b) rising unemployment c) falling interest rates d) falling deficits 2. "We're not likely to see a really tight monetary policy; he made clear that the central bank is following an 'int ...

Other / Other 10 May 2016

Why can't it achieve immediately a low interest rate if it wanted to 1. "The Fed chairman added that the principal misunderstanding about the Fed's role in the present situation is that the Fed could achieve more or less immediately a low level of interest rates if it wanted to." Why can't it achieve immediately a low interest rate if it wanted to? a) because velocity is unstable b) it could - this is just Fed rhetoric c) because it req ...

Other / Other 10 May 2016

This economic stimulus package is an example of 1. “Bonds, however, turned up on news of strong tax revenue. It is now projected that there could be a budget surplus of as much as $39 billion, much higher than the $18 billion forecast." From this information it would be reasonable to conclude that a) interest rates should rise b) the supply of bonds should fall c) the money supply should decrease d) government spending should incr ...

Other / Other 10 May 2016

How could 1995 returns on bonds be as high as 30 percent "Thanks to a sharp cut in interest rates engineered by the Fed, many economists expect the economy to be growing again, albeit slowly, by spring, which is the soonest any of President Bush's legislative proposals are likely to be enacted." 1. What major advantage of monetary policy over fiscal policy does this clipping underline? a) monetary policy is more effective b) monetary ...

Other / Other 10 May 2016

The nominal interest rate should be approximately 1. If the money supply is growing at 9%, the real interest rate is 3%, the real rate of growth of GDP is 2%, and financial innovations are reducing the demand for money by 1% per year, the nominal interest rate is a) 8% b) 9% c) 10% d) 11% 77 2. Suppose the real interest rate is 3%, the real growth rate is 2%, the money multiplier is 4, banking innovations are decreasing the demand for ...

Other / Other 10 May 2016

Explain how this flaw ruined economic policy "What is important for inflationary expectations is how the bank has responded to such shocks in the past. A central bank which has shown it will not accommodate inflationary shocks will find it much easier to maintain a stable inflation rate - whatever its level - than one with a reputation for accommodation." 1. 'Accommodate inflationary shocks' means that the central bank will a) keep the m ...

Other / Other 10 May 2016

Which of the following is the Keynesian interpretation of the sequence of events 1. Suppose the interest rate is 8%, and a bond with an annual coupon of $90 matures in one year's time, paying its face value of $1000. This bond's current price should be a) below $1000 b) $1000 c) above $1000 d) not enough information to tell 65 2. Suppose that 30 days ago a friend bought a new 90-day treasury bill with a face value of $1000, paying $976. ...

Other / Other 10 May 2016

What policy would be most appropriate here 1. “But one bright spot was a sign that U.S. inflation is in check, and economists said that trend, combined with a soft job market, will give the Fed room to ……” This statement is best completed by a) decrease taxes b) decrease the money supply c) decrease interest rates d) balance the budget 2. “Doubt we could have devastating bank runs? Doubters must exp ...

Other / Other 10 May 2016

It could backfire and drive rates higher because it could 1. "Monetary policy, by winning on inflation, is about to confer to the federal government an enormous fiscal dividend." This is because lower inflation means a) higher income which means higher tax revenues b) lower government spending on goods and services, which reduces the budget deficit c) lower nominal interest rates which means less government spending on interest paymen ...

Other / Other 10 May 2016

Lower inflation means lower interest rates because 1. "In his eyes the battle is between the rate-lowering effect of the recession and the high rate of inflation. That sums up the problem now facing the interest rate forecasters." A recession tends to lower the interest rate because a) the Fed may lower interest rates to fight the recession b) the government may increase spending to fight the recession c) income falls in a recession ...

Other / Other 10 May 2016