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Question
According to the Lucas critique, if past increases in the short-term interest rate have always been temporary, thenA. the term-structure relationship using past data will then show only a weak effect of changes in the short-term interest rate on the long-term rate.
B. the term-structure relationship using past data will show no effect of changes in the short-term interest rate on the long-term rate.
C. one cannot predict the term-structure relationship as it depends on expectations.
D. the term-structure relationship using past data will nevertheless show a strong effect of changes in the short-term interest rate on the long-term rate because of a change in the way expectations are formed.
Answer
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Related questions
Q:
In the long-run ISLM model and with everything else held constant, as long as the level of output ________ the natural rate level, the price level will continue to ________, shifting the LM curve to the ________, until finally output is back at the natural rate level.
A. exceeds; rise; right
B. exceeds; fall; left
C. remains below; fall; right
D. remains below; rise; left
Q:
An increase in the money ________ shifts the LM curve to the ________, causing the interest rate to fall and output to rise, everything else held constant.
A. demand; right
B. demand; left
C. supply; right
D. supply; left
Q:
A policy in which the money supply is kept growing at a constant rate regardless of the state of the economy is
A. a Taylor rule.
B. a discretionary policy.
C. a policy rule advocated by monetarists.
D. advocated by activists.
Q:
The argument that econometric policy evaluation is likely to be misleading if policymakers assume stable economic relationships is known as
A. the monetarist revolution.
B. the Lucas critique.
C. public choice theory.
D. new Keynesian theory.
Q:
The Lucas critique indicates that
A. advocates of discretionary policies' criticisms of rational expectations models are well-founded.
B. advocates of discretionary policies' criticisms of rational expectations models are not well-founded.
C. expectations are important in determining the outcome of a discretionary policy.
D. expectations are not important in determining the outcome of a discretionary policy.
Q:
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.
Q:
The interest rate on seasonal credit equals
A. the federal funds rate.
B. the primary credit rate.
C. the secondary credit rate.
D. an average of the federal funds rate and rates on certificates of deposits.
Q:
Decisions by ________ about their holdings of currency and by ________ about their holdings of excess reserves affect the money supply.
A. borrowers; depositors
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C. depositors; borrowers
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A. deposits; smaller
B. deposits; larger
C. currency; smaller
D. currency; larger
Q:
The discount rate refers to the interest rate on
A. primary credit.
B. secondary credit.
C. seasonal credit.
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Q:
A bank has excess reserves of $1,000 and demand deposit liabilities of $80,000 when the reserve requirement is 25 percent. If the reserve requirement is lowered to 20 percent, the bank's excess reserves will be
A. $1,000.
B. $5,000.
C. $8,000.
D. $9,000.
Q:
Which of the followings is NOT a current duty of the Board of Governors of the Federal Reserve System?
A. setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash
B. setting the maximum interest rates payable on certain types of time deposits under Regulation Q
C. approving the discount rate "established" by the Federal Reserve banks
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Q:
While the discount rate is "established" by the regional Federal Reserve Banks, in truth, the rate is determined by
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A. Sarbanes-Oxley Act of 2002
B. Global Legal Settlement of 2002
C. Gramm-Leach-Bliley Act of 1999
D. Riegle-Neal Act of 1994
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B. Increased penalties for white-collar crime and obstruction of official investigations.
C. Requires a CEO and CFO to certify that periodic financial statements and disclosure of the firm are accurate.
D. Requires investment banks to make public their analysts' recommendations.
Q:
Explain how the market can reduce the incentive for credit-rating firms to take advantage of conflicts of interest.
Q:
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A. supply; fall
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Q:
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A. supply; fall
B. supply; rise
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A. IS; upward
B. IS; downward
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Q:
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B. increases the value of the dollar, reducing net exports and equilibrium output.
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Q:
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A. ineffective screening of borrowers.
B. limits on risk-taking.
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D. lenders failure to monitor borrowers.
Q:
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B. interest rate shocks.
C. Federal Reserve policy decisions.
D. shocks to tastes and technology.
Q:
In a study published in 1963, Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period
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B. interest rates decreased before output decreased.
C. the growth rate of federal government spending decreased before output decreased.
D. the growth rate of state and local government spending decreased before output decreased.
Q:
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D. fell only slightly below the long-run trend.
Q:
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A. reverse causation is a problem.
B. structural models may understate money's effect on economic activity.
C. money supply changes are always endogenous.
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Q:
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A. nominal interest rates; investment spending
B. real interest rates; investment spending
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D. investment spending; aggregate output
Q:
To lower interest rates on residential mortgages to stimulate the housing market, the Fed extended its open market operations to purchase
A. mortgage-backed securities.
B. commercial papers.
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D. Treasury bills and Treasury notes.
Q:
The facility that was created in December of 2007 that banks can use to borrow from the Fed that has less of a stigma for banks compared to borrowing from the discount window is the
A. Term Securities Lending Facility.
B. Term Auction Facility.
C. Primary Dealer Credit Facility.
D. Commercial Paper Funding Facility.
Q:
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Q:
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A. reserve requirements; monetary base
B. reserve requirements; money multiplier
C. margin requirements; monetary base
D. margin requirements; money multiplier