Question : 31) In the long run, the real interest rate determined : 1240672

31) In the long run, the real interest rate is determined by

A) Fed actions.

B) the expected inflation rate.

C) the nominal interest rate.

D) saving supply and investment demand.

E) the multiplier effect.

32) Which of the following statements about the ripple effects of monetary policy is FALSE? Monetary policy can

A) raise the federal funds rate, thereby decreasing the quantity of money, raising the real interest rate, and decreasing investment.

B) lower the federal funds rate, thereby increasing the supply of loanable funds, and lowering the exchange rate.

C) lower the federal funds rate, thereby lowering the real interest rate and increasing aggregate demand.

D) raise the federal funds rate and shift the aggregate demand curve leftward.

E) raise the federal funds rate, thereby raising the real interest rate and increasing potential GDP.

33) If the Federal Reserve lowers the Federal funds rate,

A) other short-term interest rates fall.

B) net exports decrease.

C) other short-term interest rates rise.

D) the price level falls.

E) Both answers A and C are correct.

34) If the Fed raises the federal funds rate, which of the following happens?

A) net exports increase

B) the real interest rate falls

C) aggregate demand decreases

D) real GDP increases

E) the price level rises

35) The FOMC is concerned about inflation and has ________ the federal funds rate. Due to substitution effects, other ________ interest rates will ________ almost immediately.

A) increased; short-term; increase

B) decreased; long-term; decrease

C) increased; long-term; increase

D) increased; short-term; decrease

E) decreased; short-term; decrease

36) If the Federal Reserve decreases the Federal funds rate, other short-term interest rates ________ and the exchange rate ________.

A) fall; falls

B) do not change; rises

C) fall; does not change

D) fall; rises

E) do not change; falls

37) A decrease in the federal funds rate

A) increases other short-term interest rates, decreases investment, and decreases aggregate demand.

B) lowers the exchange rate, increases the supply of loanable funds, and increases aggregate demand.

C) lowers other sort-term interest rate, raises the real interest rate, and increases aggregate demand.

D) decreases the supply of loanable funds, raises the real interest rate, and decreases aggregate demand.

E) decreases the demand for loanable funds, lowers the real interest rate, and decreases aggregate demand.

38) A fall in the federal funds rate leads to

A) a decrease in the quantity of money.

B) a rise in the real interest rate.

C) a decrease in investment.

D) a rise in the price level.

E) a decrease in real GDP.

39) If the Fed lowers the federal funds rate, which of the following will NOT happen?

A) the real interest rate falls

B) other short-term interest rates fall

C) aggregate demand increases

D) real GDP increases

E) the price level falls

40) When the Federal Reserve raises the federal funds rate, the quantity of reserves ________, the quantity of money ________, and the quantity of loans ________.

A) decreases; decreases; decreases

B) decreases; decreases; does not change

C) decreases; does not change; does not change

D) increases; increases; decreases

E) increases; increases; increases