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1、1 Economics of Money,Banking,and Financial Markets,11e,Global Edition(Mishkin)Chapter 22 The Monetary Policy and Aggregate Demand Curves 22.1 The Federal Reserve and Monetary Policy 1)Because prices are slow to move in the short-run,when the Federal Reserve lowers the federal funds rate A)nominal in
2、terest rates rise.B)real interest rates fall.C)inflation falls.D)real interest rates rise.Answer:B AACSB:Analytical Thinking 2)Because prices are sticky in the short-run,when the Federal Reserve raises the federal funds rate A)nominal interest rates fall.B)real interest rates rise.C)inflation falls.
3、D)real interest rates fall.Answer:B AACSB:Analytical Thinking 22.2 The Monetary Policy Curve 1)The monetary policy(MP)curve indicates the relationship between A)the Federal Funds Rate and the real interest rate.B)the Federal Funds Rate and the inflation rate.C)the inflation rate and the expected inf
4、lation rate.D)the real interest rate the central bank sets and the inflation rate.Answer:D AACSB:Reflective Thinking 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
5、.C)the central bank raises nominal interest rates when inflation rises.D)the central bank raises real interest rates when inflation rises.Answer:D AACSB:Reflective Thinking 2 3)The Taylor Principle states that central banks raise nominal rates by _ than any rise in expected inflation so that real in
6、terest rates _ when there is a rise in inflation.A)less;rise B)more;fall C)less;fall D)more;rise Answer:D AACSB:Reflective Thinking 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
7、)shifts the monetary policy curve upward.D)shifts the monetary policy curve downward.Answer:C AACSB:Analytical Thinking 5)An autonomous easing 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 mone
8、tary policy curve upward.D)shifts the monetary policy curve downward.Answer:D AACSB:Analytical Thinking 6)Based on the Taylor Principle,a central banks endogenous response of raising interest rates when inflation rises A)causes an upward movement along the monetary policy curve.B)causes a downward m
9、ovement along the monetary policy curve.C)shifts the monetary policy curve upward.D)shifts the monetary policy curve downward.Answer:A AACSB:Analytical Thinking 7)Based on the Taylor Principle,a central banks endogenous response of decreasing interest rates when inflation falls A)causes an upward mo
10、vement 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:B AACSB:Analytical Thinking 3 8)Inflationary pressures caused the FOMC to increase the federal funds rate b
11、y of a percentage point in June 2004,and by exactly the same amount at every subsequent FOMC meeting through June of 2006.Theses actions A)caused an upward movement along the monetary policy curve.B)caused a downward movement along the monetary policy curve.C)shifted the monetary policy curve upward
12、.D)shifted the monetary policy curve downward.Answer:A AACSB:Analytical Thinking 9)The Feds policy actions of reacting to higher inflation by raising the real interest rate during 2004-2006 were A)upward movements along the monetary policy curve.B)downward movement along the monetary policy curve.C)
13、upward shifts of the monetary policy curve.D)downward shifts of the monetary policy curve.Answer:A AACSB:Analytical Thinking 10)When the financial crisis started in August 2007,inflation was rising and the Fed began an aggressive easing lowering of the federal funds rate,which indicated that A)the F
14、ed pursued an autonomous monetary policy tightening.B)the Fed pursued an autonomous monetary policy easing.C)the Fed had an automatic negative response to inflation based on the Taylor rule.D)the Fed had an automatic positive response to inflation based on the Taylor rule.Answer:B AACSB:Analytical T
15、hinking 11)When the financial crisis started in August 2007,inflation was rising and the Fed began an aggressive easing lowering of the federal funds rate,which indicated that A)there was an upward movement along the monetary policy curve.B)there was a downward movement along the monetary policy cur
16、ve.C)the monetary policy curve shifted upward.D)the monetary policy curve shifted downward.Answer:D AACSB:Analytical Thinking 22.3 The Aggregate Demand Curve 1)In deriving the aggregate demand curve a _ inflation rate leads the central bank to _ real interest rates,thereby _ the level of equilibrium
17、 aggregate output.A)higher;raise;lowering B)lower;raise;lowering C)higher;lower;lowering D)higher;lower;raising Answer:A AACSB:Reflective Thinking 4 2)The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to raise _ interest rates,thereby _ the level o
18、f equilibrium aggregate output.,everything else held constant.A)real;lowering B)real;raising C)nominal;lowering D)nominal;raising Answer:A AACSB:Analytical Thinking 3)The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to _ real interest rates,thereb
19、y _ the level of equilibrium aggregate output.,everything else held constant.A)raise;lowering B)raise;raising C)reduce;lowering D)reduce;raising Answer:A AACSB:Analytical Thinking 4)Everything else held constant,an increase in government spending will cause A)aggregate demand to increase.B)aggregate
20、 demand to decrease.C)the quantity of aggregate demand to increase.D)the quantity of aggregate demand to decrease.Answer:A AACSB:Analytical Thinking 5)Everything else held constant,an autonomous easing of monetary policy will cause A)the quantity of aggregate demand to increase.B)the quantity of agg
21、regate demand to decrease.C)aggregate demand to decrease.D)aggregate demand to increase.Answer:D AACSB:Analytical Thinking 6)Everything else held constant,an autonomous tightening of monetary policy will cause A)the quantity of aggregate demand to increase.B)the quantity of aggregate demand to decre
22、ase.C)aggregate demand to increase.D)aggregate demand to decrease.Answer:D AACSB:Analytical Thinking 5 7)Everything else held constant,an autonomous easing of monetary policy will cause A)aggregate demand to increase.B)aggregate demand to decrease.C)the quantity of aggregate demand to increase.D)the
23、 quantity of aggregate demand to decrease.Answer:A AACSB:Analytical Thinking 8)Everything else held constant,an increase in autonomous consumer spending will cause the IS curve to shift to the _ and aggregate demand will _.A)right;increase B)right;decrease C)left;increase D)left;decrease Answer:A AA
24、CSB:Analytical Thinking 9)Everything else held constant,a decrease in autonomous consumer spending will cause the IS curve to shift to the _ and aggregate demand will _.A)right;increase B)right;decrease C)left;increase D)left;decrease Answer:D AACSB:Analytical Thinking 10)Everything else held consta
25、nt,an increase in autonomous planned investment spending will cause the IS curve to shift to the _ and aggregate demand will _.A)right;increase B)right;decrease C)left;increase D)left;decrease Answer:A AACSB:Analytical Thinking 11)Everything else held constant,a decrease in autonomous planned invest
26、ment spending will cause the IS curve to shift to the _ and aggregate demand will _.A)right;increase B)right;decrease C)left;increase D)left;decrease Answer:D AACSB:Analytical Thinking 6 12)Everything else held constant,a decrease in net taxes will cause the IS curve to shift to the _ and aggregate
27、demand will _.A)right;increase B)right;decrease C)left;increase D)left;decrease Answer:A AACSB:Analytical Thinking 13)Everything else held constant,an increase in net taxes will cause the IS curve to shift to the _ and aggregate demand will _.A)right;increase B)right;decrease C)left;increase D)left;
28、decrease Answer:D AACSB:Analytical Thinking 14)Everything else held constant,an appreciation of the domestic currency will cause the IS curve to shift to the _ and aggregate demand will _.A)right;increase B)right;decrease C)left;increase D)left;decrease Answer:D AACSB:Analytical Thinking 15)Everythi
29、ng else held constant,a depreciation of the domestic currency will cause the IS curve to shift to the _ and aggregate demand will _.A)right;increase B)right;decrease C)left;increase D)left;decrease Answer:A AACSB:Analytical Thinking 16)Everything else held constant,a decrease in government spending will cause the IS curve to shift to the _ and aggregate demand will _.A)right;increase B)right;decrease C)left;increase D)left;decrease Answer:D AACSB:Analytical Thinking