Question : 4) The Fed decreases the quantity of money to counteract A) : 1240658

4) The Fed decreases the quantity of money to counteract

A) a recessionary gap.

B) a federal budget deficit.

C) positive net exports.

D) an inflationary gap.

E) a rise in the unemployment rate.

5) The Fed increases the quantity of money to counteract

A) a recessionary gap.

B) a federal budget surplus.

C) negative net exports.

D) an inflationary gap.

E) inflation.

6) During the Great Depression, real GDP decreased, unemployment soared, and the inflation rate was negative. Which would have been the appropriate federal government policy combination to improve economic performance?

A) increase government expenditure, decrease taxes, increase the quantity of money

B) increase government expenditure, decrease taxes, decrease the quantity of money

C) decrease government expenditure, increase taxes, decrease the quantity of money

D) do not change government expenditures or taxes , increase the quantity of money

E) decrease government expenditures, increase taxes, do not change the quantity of money

7) During the late 1960s, real GDP increased, unemployment fell, and the inflation rate started to rise. Which would have been the appropriate federal government policy combination to improve economic performance by lowering the inflation rate?

A) increase government expenditures, decrease taxes, increase the quantity of money

B) increase government expenditures, decrease taxes, decrease the quantity of money

C) decrease government expenditures, increase taxes, decrease the quantity of money

D) do not change government expenditures or taxes , increase the quantity of money

E) increase government expenditures, decrease taxes, do not change the quantity of money

8) A(n) ________ in the supply of loanable funds ________ the real interest rate and ________ investment. 

A) increase; raises; decreases

B) increase; raises; increases

C) decrease; raises; decreases

D) decrease; lowers; decreases

E) decrease; raises; increases

9) When the Fed ________ the federal funds rate, other short-term interest rates and the exchange rate also ________.  The quantity of money and the supply of loanable funds ________. 

A) raises; rise; increase

B) raises; fall; increase

C) lowers; fall; increase

D) lowers; rise; increase

E) lowers; fall; decrease

10) An increase in the supply of bank loans ________ the supply of loanable funds so the real interest rate ________ and investment ________. 

A) increases; falls; decreases

B) decreases; rises; increases

C) decreases; falls; increases

D) increases; falls; increases

E) increases; rises; increases

11) A decrease in monetary base ________ the quantity of money, the interest rate ________, and the quantity of money demanded ________. 

A) decreases; rises; decreases

B) decreases; falls; decreases

C) decreases; rises; increases

D) decreases; falls; increases

E) increases; falls; decreases

12) When the Fed ________ the federal funds rate, other short-term interest rates ________ and the exchange rate ________. 

A) lowers; rise; falls

B) raises; rise; rises

C) raises; fall; rises

D) raises; rise; falls

E) lowers; rise; rises

13) If the economy slips into recession, the Fed ________ the federal funds rate, which ________ the short-term interest rate, and ________ the quantity of money. 

A) lowers; raises; increases

B) raises; lowers; increases

C) raises; lowers; decreases

D) lowers; lowers; increases

E) lowers; lowers; decreases

14) Money targeting works when the demand for money curve is ________ and predictable.  Technological change in the banking system has led to ________ and ________ shifts in the demand for money curve. 

A) stable; small; unpredictable

B) stable; large; predictable

C) stable; small; predictable

D) unstable; large; unpredictable

E) stable; large; unpredictable