ECON 2120 CLEMSON EXAM 3 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
A decrease in money supply growth will cause the - Answers AD curve to shift inward.
All else held equal, when the federal reserve makes an open market purches, the money supply: -
Answers increases
An open market operation occurs when: - Answers the Fed buys or sells government bonds
Compared to fiscal policy, which type of lag tends to be shorter for monetary policy? - Answers
implementation lag and decision lag
Consider the money multiplier that includes cash holding bby the public and excess reserves held by
the bank. An increase in the excess reserves, for a given monetary base, will result in.... - Answers a
decrease in M1.
Discount rate lending occurs when the Federal Reserve - Answers lends reserves directly to banks.
During the 1970's, the Fed often reacted to negative oil shocks by increasing the money supply and
focusing on: - Answers increasing long-run growth in the economy
if businesses react to a pessimistic outlook and decrease spending, the Fed can counteract this by: -
Answers increasing money supply, which may lower real interest rates and encourage borrowing
If the average reserve ratio in the banking system is 20% and the Fed increases bank reserves by
$100,000, what will be the total potential increase in the money supply. - Answers $500,000
If the Fed wants to increase the money supply, it will ______ Treasury securities. - Answers buy
If the Federal Reserve wished to avoid short-run increases in the unemployment rate, the correct
response to a negative AD shock would be.... - Answers an increase in money supply growth.
If the objective of the central bank is to maintain price stability and maximum real GDP growth,
monetary policy is: - Answers less effective in dealing with real shocks than with aggregate demand
shocks.
If the required reserve ratio is 25%, the money multiplier is - Answers 4
In response to a negative economic shock, we would expect banks to ______ reserves, the currency
deposit ratio to ________ and M1 to _______. - Answers decrease, decrease, increase.
In the case of a negative shock to aggregate demand, the central bank should.... - Answers increase
the rate of growth in the money supply to restore spending growth.
In the model where prices are slow to adjust, if the Fed adheres to a strict "money growth rule" of 6%
(that is they keep %DM at 6% no matter what), what happens if theres an increase in consumer and
business confidence? - Answers inflation, real growth, and employment all increase.
In the New Keynesian model, suppose the Fed reacts to an economic shock and quickly restores the
economy to the Solow growth rate. The shock most likely - Answers an aggregate demand shock
In the short run, if the federal reserve responds to a negative real shock with an increase in money
supply growth, the inflation rate will increase because of - Answers both the real shock and the
increased money supply growth.
M2 includes: - Answers currency, checkable deposits, savings deposits, money market mutual funds,
and small-time deposits
Open market operations refer to... - Answers the buying and selling of government bonds by the fed.
Quantitative easing occurs when the... - Answers fed buys long-term securities
Shortly after September 11, 2011, the Federal Reserve - Answers increased its lending to banks.
suppose following the events at last week's Boston Marathon people decide to hold more currency. In
particular, suppose individuals decide to hold more cash (and less checkable deposits) and banks
decide to hold more excess reserves. In order to "offset" the economic impact, we might expect the
Federal Reserve to..... - Answers increase the monetary base.
Suppose the federal reserve's objective was to maintain price stability. In the Real Business Cycle
Model, where prices are fully flexible, how would the Federal Reserve respond to a positive
technology shock? - Answers they would buy bonds
The dual mandate refers to the Fed's objective of _______ and ______. - Answers maximum growth,
low inflation.
The fed's job in manipulating monetary policy is made harder by the fact that: - Answers the fed has
to operate in real time and information on recessions usually becomes available with a lag.
The federal funds rate is the - Answers overnight lending rate from one major bank to another.
The Federal Reserve - Answers clears all checks
makes monetary policy
supervises the banking sector
A decrease in money supply growth will cause the - Answers AD curve to shift inward.
All else held equal, when the federal reserve makes an open market purches, the money supply: -
Answers increases
An open market operation occurs when: - Answers the Fed buys or sells government bonds
Compared to fiscal policy, which type of lag tends to be shorter for monetary policy? - Answers
implementation lag and decision lag
Consider the money multiplier that includes cash holding bby the public and excess reserves held by
the bank. An increase in the excess reserves, for a given monetary base, will result in.... - Answers a
decrease in M1.
Discount rate lending occurs when the Federal Reserve - Answers lends reserves directly to banks.
During the 1970's, the Fed often reacted to negative oil shocks by increasing the money supply and
focusing on: - Answers increasing long-run growth in the economy
if businesses react to a pessimistic outlook and decrease spending, the Fed can counteract this by: -
Answers increasing money supply, which may lower real interest rates and encourage borrowing
If the average reserve ratio in the banking system is 20% and the Fed increases bank reserves by
$100,000, what will be the total potential increase in the money supply. - Answers $500,000
If the Fed wants to increase the money supply, it will ______ Treasury securities. - Answers buy
If the Federal Reserve wished to avoid short-run increases in the unemployment rate, the correct
response to a negative AD shock would be.... - Answers an increase in money supply growth.
If the objective of the central bank is to maintain price stability and maximum real GDP growth,
monetary policy is: - Answers less effective in dealing with real shocks than with aggregate demand
shocks.
If the required reserve ratio is 25%, the money multiplier is - Answers 4
In response to a negative economic shock, we would expect banks to ______ reserves, the currency
deposit ratio to ________ and M1 to _______. - Answers decrease, decrease, increase.
In the case of a negative shock to aggregate demand, the central bank should.... - Answers increase
the rate of growth in the money supply to restore spending growth.
In the model where prices are slow to adjust, if the Fed adheres to a strict "money growth rule" of 6%
(that is they keep %DM at 6% no matter what), what happens if theres an increase in consumer and
business confidence? - Answers inflation, real growth, and employment all increase.
In the New Keynesian model, suppose the Fed reacts to an economic shock and quickly restores the
economy to the Solow growth rate. The shock most likely - Answers an aggregate demand shock
In the short run, if the federal reserve responds to a negative real shock with an increase in money
supply growth, the inflation rate will increase because of - Answers both the real shock and the
increased money supply growth.
M2 includes: - Answers currency, checkable deposits, savings deposits, money market mutual funds,
and small-time deposits
Open market operations refer to... - Answers the buying and selling of government bonds by the fed.
Quantitative easing occurs when the... - Answers fed buys long-term securities
Shortly after September 11, 2011, the Federal Reserve - Answers increased its lending to banks.
suppose following the events at last week's Boston Marathon people decide to hold more currency. In
particular, suppose individuals decide to hold more cash (and less checkable deposits) and banks
decide to hold more excess reserves. In order to "offset" the economic impact, we might expect the
Federal Reserve to..... - Answers increase the monetary base.
Suppose the federal reserve's objective was to maintain price stability. In the Real Business Cycle
Model, where prices are fully flexible, how would the Federal Reserve respond to a positive
technology shock? - Answers they would buy bonds
The dual mandate refers to the Fed's objective of _______ and ______. - Answers maximum growth,
low inflation.
The fed's job in manipulating monetary policy is made harder by the fact that: - Answers the fed has
to operate in real time and information on recessions usually becomes available with a lag.
The federal funds rate is the - Answers overnight lending rate from one major bank to another.
The Federal Reserve - Answers clears all checks
makes monetary policy
supervises the banking sector
