Question 1 (1 point) If the unemployment rate is 4.5% and the inflation rate is

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Question 1 (1 point)

If the unemployment rate is 4.5% and the inflation rate is 6%, the Federal Reserve will most likely:

Question 1 options:

a)

b)

c)

d)

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Question 2 (1 point)

If the Federal Reserve increases its purchase of bonds, then the money supply will _____ and aggregate demand will _____.

Question 2 options:

a)

b)

c)

d)

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Question 3 (1 point)

The money illusion:

Question 3 options:

a)

b)

c)

d)

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Question 4 (1 point)

When the Federal Reserve pursues expansionary monetary policy, which of these happens?

Question 4 options:

a)

b)

c)

d)

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Question 5 (1 point)

A higher interest rate _____ consumption, investment, and _____, which _____ aggregate demand.

Question 5 options:

a)

b)

c)

d)

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Question 6 (1 point)

Question 6 options:

a)

b)

c)

d)

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Question 7 (1 point)

Question 7 options:

a)

b)

c)

d)

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Question 8 (1 point)

If the Federal Reserve wishes to raise the interest rate, what does it need to do?

Question 8 options:

a)

b)

c)

d)

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Question 9 (1 point)

The twin goals of monetary policy are:

Question 9 options:

a)

b)

c)

d)

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Question 10 (1 point)

If monetary policy is tight:

Question 10 options:

a)

b)

c)

d)

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Question 11 (1 point)

A _____ is the most difficult for the Federal Reserve to address because it causes both inflation and unemployment to rise.

Question 11 options:

a)

b)

c)

d)

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Question 12 (1 point)

If the economy is currently operating below long-run output, what should the Federal Reserve do?

Question 12 options:

a)

b)

a)

buy bonds.

b)

lower the reserve requirement.

c)

sell bonds.

d)

lower the discount rate.

Explanation / Answer

1.

If the unemployment rate is 4.5% and the inflation rate is 6%, the Fed will most likely sell bonds.

Option C

2.

If the Federal Reserve increases its purchase of bonds, then the money supply will increase and aggregate demand will increase

Option B

3.

The money illusion is the misperception that prices have changed; it occurs when the Federal Reserve reduces the money supply.

Option d

4.

When the Federal Reserve pursues expansionary monetary policy, a) AD shifts right.

Option A

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