Question : 21) In the short run, when the Fed raises the : 1228042

 

 

21) In the short run, when the Fed raises the federal funds rate,

A) the real interest rate is unchanged so investment and consumption expenditure are not changed.

B) the real interest rate temporarily increases, thereby decreasing investment and consumption expenditure.

C) the real interest rate temporarily falls, thereby increasing investment and consumption expenditure.

D) investment and consumption expenditure increase, thereby raising the real interest rate temporarily.

E) the real interest rate temporarily increases, thereby decreasing investment and increasing consumption expenditure.

 

22) In the short run, when the Fed increases the nominal interest rate, the real interest rate

A) temporarily rises.

B) permanently rises.

C) temporarily falls.

D) permanently falls.

E) does not change.

23) In the short run, when the Fed increases the federal funds rate,

A) there is no effect on investment because investment depends on the real interest rate.

B) the real interest rate falls and investment increases.

C) the real interest rate rises and investment decreases.

D) the real interest rate is unaffected but investment still decreases.

E) the real interest rate rises and investment does not change.

 

24) When the Fed ________ the federal funds rate, the opportunity cost of firms’ investment ________ and so the quantity of investment ________.

A) decreases; rises; decreases

B) increases; rises; decreases

C) increases; rises; increases

D) decreases; falls; decreases

E) increases; falls; increases

 

25) If the Fed lowers the federal funds rate, which of the following occurs?

A) Investment increases.

B) Consumption expenditure decreases.

C) The price of the dollar on the foreign exchange market increases.

D) Net exports decreases.

E) Government expenditures on goods and services increases.

 

26) When the FOMC raises the federal funds rate, almost immediately ________ and a few weeks later the ________.

A) short-term interest rates rise; quantity of money and supply of loanable funds decrease

B) long-term interest rates rise; quantity of money and supply of loanable funds decrease

C) short-term interest rates fall; quantity of money and supply of loanable funds decrease

D) long-term interest rates rise; quantity of money and supply of loanable funds increase

E) short-term interest rates fall; quantity of money and supply of loanable funds increase

27) Suppose the Fed raises the federal funds rate. Put the following changes in order in which they occur, starting with the changes that take place almost immediately and ending with the changes that may occur up to two years afterwards:

i.short-term interest rates rise

ii. long-term interest rate rises

iii.aggregate demand decreases

iv.inflation rate decreases

A) i-ii-iii-iv

B) ii-i-iii-iv

C) i-ii-iv-iii

D) i-iii-ii-iv

E) ii-i-iv-iii

 

28) Suppose the Federal Reserve lowers the federal funds rate. Put the following changes in order in which they occur, starting with the changes that take place almost immediately and ending with the changes that may occur up to a year afterwards:

i.quantity of money increases

ii.quantity of reserves increases

iii.aggregate demand increases

iv.the long-term real interest rate falls

A) ii-i-iv-iii

B) i-ii-iv-iii

C) ii-i-iii-iv

D) i-ii-iii-iv

E) iii-iv-i-ii

 

29) The Fed raises the federal funds rate. Which of the following changes takes the longest time before it occurs?

A) short-term interest rates rise

B) exchange rate rises

C) quantity of money decreases

D) supply of loanable funds decreases

E) aggregate demand decreases

30) The Fed raises the federal funds rate. Which of the following changes occurs most rapidly?

A) exchange rate rises

B) consumption expenditure decreases

C) aggregate demand decreases

D) real GDP growth decreases

E) inflation rate decreases