the economics of money, banking, and financial markets

(Sean Pound) #1
711 $
© 2014 Pearson Canada Inc.$



  1. Tightening monetary policy refers to ____.
    A) higher real interest rates
    B) higher nominal interest rates
    C) lower real interest rates
    D) lower nominal interest rates
    Answer: A
    Diff: 2 Type: MC Page Ref: 560
    Skill: Recall
    Objective List: 22.3 Evaluate how fiscal policy variables (spending and taxes) and monetary
    policy variables (the money supply and the interest rate) enter into these models




  2. The upward slope of the MP curve indicates that ____.
    A) the central bank lowers real interest rates when inflation rises
    B) the central bank raises real interest rates when inflation falls
    C) the central bank raises nominal interest rates when inflation rises
    D) the central bank raises real interest rates when inflation rises
    Answer: D
    Diff: 2 Type: MC Page Ref: 560
    Skill: Recall
    Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
    the interest rate




  3. The Taylor Principle states that central banks raise nominal rates by ____ than any rise
    in expected inflation so that real interest rates ____ when there is a rise in inflation.
    A) less; rise
    B) more; fall
    C) less; fall
    D) more; rise
    Answer: D
    Diff: 2 Type: MC Page Ref: 559
    Skill: Recall
    Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
    the interest rate




  4. An autonomous tightening of monetary policy ____.
    A) causes an upward movement along the monetary policy curve
    B) causes a downward movement along the monetary policy curve
    C) shifts the monetary policy curve upward
    D) shifts the monetary policy curve downward
    Answer: C
    Diff: 2 Type: MC Page Ref: 560
    Skill: Recall
    Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
    the interest rate



Free download pdf