Question : 31) In the short run, if the Fed wants to : 1238253

Economics

31) In the short run, if the Fed wants to raise the federal funds rate, it

A) instructs large commercial banks to sell government securities in the open market.

B) instructs the New York Fed to sell government securities in the open market.

C) tells large commercial banks to raise their interest rates.

D) instructs the New York Fed to sell government securities in the foreign exchange market.

E) instructs the New York Fed to buy government securities in the open market.

32) By using open market operations, the Federal Reserve

A) adjusts the supply of reserves to keep the federal funds interest rate equal to its target.

B) adjusts the supply and demand of reserves to keep the federal funds interest rate equal to its target.

C) adjusts the demand of reserves to keep bank rates in line with the federal funds rate target.

D) controls banks’ demand for reserves, thereby keeping the federal funds rate equal to its target.

E) None of the above answers is correct.

33) The higher the federal funds rate, the ________ the opportunity cost of holding reserves, which ________ the incentive to economize on reserves.

A) higher; increases

B) higher; decreases

C) lower; increases

D) lower; does not change

E) lower; decreases

34) Equilibrium in the market for bank reserves determines the

A) federal funds rate.

B) inflation rate.

C) price level.

D) 30-year Treasury bond rate.

E) exchange rate.

35) If the Fed increases the quantity of reserves, a new equilibrium is reached by a

A) rightward shift of the demand for reserves curve.

B) movement down the demand for reserves curve.

C) leftward shift of the demand for reserves curve.

D) movement up the demand for reserves curve.

E) None of the above answers is correct.

36) In the market for bank reserves, if the federal funds rate target is higher than the federal funds rate, the Fed will take action to ________ reserves.

A) decrease the supply of

B) increase the supply of

C) increase both the demand for and the supply of

D) increase the demand for

E) decrease the demand for

37) Maximum employment and moderate long-term interest rates are best achieved with

A) high and stable inflation rates.

B) high and variable inflation rates.

C) high real interest rates.

D) high short-term interest rates.

E) price stability.

38) The operational goals the Fed uses for its monetary policy objectives are

A) the federal funds rate and the supply of reserves.

B) the demand for reserves and the supply of reserves.

C) the supply of reserves and the output gap.

D) the core inflation rate and the output gap.

E) the federal funds rate and the core inflation rate.

39) Which of the following is the Fed’s monetary policy instrument?

A) the output gap

B) the core inflation rate

C) the federal funds rate

D) the supply of reserves

E) the demand for reserves

40) To lower the federal funds rate, the Fed conducts an open market ________ of securities which ________.

A) sale; increases the demand for reserves

B) sale; increases the supply of reserves

C) purchase; increases the demand for reserves

D) purchase; decreases the demand for reserves

E) None of the above answers is correct.

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July 1, 2023

71.SupposethatanAmericanopensandoperatesacandyfactoryinFinland.Thisisanexampleof

a.foreigndirectinvestment.AmericansavingisusedtofinanceFinishinvestment.

b.foreigndirectinvestment.AmericansavingisusedtofinanceAmericaninvestment.

c.foreignportfolioinvestment.AmericansavingisusedtofinanceFinishinvestment.

d.foreignportfolioinvestment.AmericansavingisusedtofinanceAmericaninvestment.

72.SupposethatanAmericancompanyopensandoperatesarestaurantinIreland.Thisisanexampleof

a.foreigndirectinvestment.AmericansavingisusedtofinanceIrishinvestment.

b.foreigndirectinvestment.AmericansavingisusedtofinanceAmericaninvestment.

c.foreignportfolioinvestment.AmericansavingisusedtofinanceIrishinvestment.

d.foreignportfolioinvestment.AmericansavingisusedtofinanceAmericaninvestment.

73.Foreignsavingisusedfordomesticinvestmentwhenforeignersengagein

a.foreigndirectinvestment.

b.foreignportfolioinvestment.

c.eitherforeigndirectinvestmentorforeignportfolioinvestment.

d.Noneoftheaboveiscorrect.

74.IfWarmWear,aU.S.manufacturerofwinterclothing,opensanewfactoryinAustria,then

a.AustrianGNPincreasesbymorethanAustrianGDP,becauseGDPincludesincomeearnedbyforeignersworkinginAustria.

b.AustrianGNPincreasesbymorethanAustrianGDP,becauseGDPexcludesincomeearnedbyforeignersworkinginAustria.

c.AustrianGNPincreasesbylessthanAustrianGDP,becauseGDPincludesincomeearnedbyforeignersworkinginAustria.

d.AustrianGNPincreasesbylessthanAustrianGDP,becauseGDPexcludesincomeearnedbyforeignersworkinginAustria.

75.SupposeaU.S.automakerbuildsandoperatesanewfactoryinItaly.Futureproductionfromsuchaninvestmentwill

a.increaseItalianGDPmorethanitincreasesItalianGNP.

b.increaseItalianGNPmorethanitincreasesItalianGDP.

c.havenoaffectonItalianGNP,butwillincreaseItalianGDP.

d.havenoaffectoneitherItalianGDPorGNP.

76.SupposeJapanese-basedToshibaCorporationbuildsandoperatesanewcomputerfactoryintheUnitedStates.

a.increaseU.S.GNPmorethanitincreasesU.S.GDP.

b.increaseU.S.GDPmorethanitincreasesU.S.GNP.

c.havenoaffectonU.S.GNP,butwillincreaseU.S.GDP.

d.havenoaffectonU.S.GNPorGDP.

77.TheopeningofanewAmerican-ownedfactoryinAlgeriawouldtendtoincreaseAlgeria'sGDPmorethanitincreasesAlgeria'sGNPbecause

a.someoftheincomefromthefactoryaccruestopeoplewhodonotliveinAlgeria.

b.grossdomesticproductisincomeearnedwithinacountrybybothresidentsandnonresidents,whereasgrossnationalproductistheincomeearnedbyresidentsofacountrywhileproducingbothathomeandabroad.

c.alloftheincomefromthefactoryisincludedinAlgeria'sGDP.

d.Alloftheabovearecorrect.

78.IfaJapanesecompanyopensanewfactoryinSouthKorea,itmakes

a.foreigndirectinvestment.ThefactorywillmakeabiggerimpactonSouthKorea’sGDPthanonitsGNP.

b.foreigndirectinvestment.ThefactorywillmakeabiggerimpactonSouthKorea’sGNPthanonitsGDP.

c.foreignportfolioinvestment.ThefactorywillmakeabiggerimpactonSouthKorea’sGDPthanonitsGNP.

d.foreignportfolioinvestment.ThefactorywillmakeabiggerimpactonSouthKorea’sGNPthanonitsGDP.

79.WhenChileexperiencesinvestmentfromabroad,itexperiences,asaresult,

a.anincreaseinproductivity.

b.adecreaseinGrossNationalProduct(GNP).

c.lowerwagesforChileanworkers.

d.Noneoftheaboveiscorrect.

80.IfcompaniesfromforeigncountriesbuildandoperatefactoriesinChina,thenChina’sproductivity

a.andthewagesofChineseworkersincrease.

b.increasesbutthewagesofChineseworkersdecrease.

c.decreasesbutthewagesofChineseworkersincrease.

d.andthewagesofChineseworkersdecrease.