1 5 pts Index funds promise to beat the market provide a return that is in line with the CPI mimic a stock index and generally outcompete actively managed funds actively pick stocks Question 2 10 pts A stockholder portion of a company, while a bondholder money to a corporation. Enter the verbs, in the boxes above, in lowercase only. DO NOT include spaces, period or other symbols. Question 3 10 pts Suppose a $1,000 bond you own earns 7% coupon a year. The competition offers a similar bond at a coupon rate of 6%. Question: Calculate the market price of your bond. Enter your answer in the box below. Round your answer to two decimals (e.g. if your answer is $857.825, enter 857.83). DO NOT include $ sign or other symbols. Question 4 5 pts Refer to the accompanying figure. Point B, and D are known as D Real GDP (1996 dollars, billions) B - E Enter only lowercase answers in the box above. One word answer is acceptable! Question 6 5 pts Suppose a country's natural rate of unemployment is 2 percent and potential output equals $100 billion. Question: Calculate the output gap If the actual unemployment rate is 2 percent Enter your answer in the box below. DO NOT include any $ signs or other symbols (e.g. if your answer is $10,000,000, only enter 10 and exclude the millions) Question 7 5 pts Okun's law states the relationship between the money supply and the velocity of money unemployment and inflation unemployment and output frictional unemployment and structural unemployment Question 8 5 pts Monetary policy is conducted by Only lowercase answers. Two-word answers are acceptable, but not required! Question 9 5 pts Two examples of automatic stabilizers include and Only lowercase answers. Two-word answers are acceptable, but not required! Question 10 5 pts The overnight interest rate that commercial banks charge each other is known as the Only lowercase answers. Two-word answers are acceptable, but not required! Question 11 5 pts The interest rate that the fed charges commercial banks is known as the Only lowercase answers. Two-word answers are acceptable, but not required! Question 11 5 pts The interest rate that the fed charges commercial banks is known as the Only lowercase answers. Two-word answers are acceptable, but not required! Question 12 10 pts Suppose $100 is held by the public, banks hold $200 in reserves, and the reserve ratio is 10 percent. Question: Calculate the money supply if commercial banks borrow $50 in reserves from the Fed through discount lending window and the public maintains the same amount of currency it currently holds Enter your answer below. DO NOT include any symbols and round to the nearest decimal (e.g. enter 1001 if your answer is $1,000.66) Question 13 5 pts Refer to the graph below Nominal Interest Rate (i) 9% Money Supply MS 7% 5% 3% 1% Money Demand MD 100 300 500 700 900 Money Suppose the Federal Reserve targets a nominal interest rate at 7 percent. it must conduct open market to set the money supply at Refer to the graph below Nominal Interest Rate (i) 9% 7% 5% 3% 1% Money Supply -- --I- Money Demand MD 100 300 500 700 900 Money Suppose the Federal Reserve targets a nominal interest rate at 7 percent. it must conduct open market to set the money supply at purchases; 300 sales; 500 sales; 300 purchases; 700 Question 16 5 pts The current U.S. economy has faced a sharp increase in inflation. Among the unconventional tools the Fed undertook include mortgage backed securities purchases expansionary monetary policy bank access to the discount window mortgage backed securities sales Question 14 5 pts High inflation, high unemployment and slow, or negative, economic growth is known as Enter your answer below only in lowercase. One-word answer is acceptable, but not required! Refer to the accompanying graph LRAS C Inflation Rate SRAS' SRAS AD' AD Y' Output " An adverse inflation shock, in the short term, will cause the frms to keep their prices unchanged, in the long run, to increase consumption prices to move along the AD curve from point A to point B AD curve to shift from point A to point C, leading to higher inflation output to remain constant as it is a short term shock Question 18 5 pts The actions that the Federal Reserve took during the shutdown include conduct contractionary monetary policy to aggressively stimulate the economy increase the money supply and extend lending to small and large enterprises decrease the money supply and extend lending to small and large enterprises none of the answers Question 19 5 pts Refer to the accompanying graph. The Fed has revisited the 2 percent inflation target and widened its range. Among the reasons include: intlation *+8.2% in Sept. '75 2000 ear-over-year percentage change in the Consumer Price Index Source: Bureau of Labor Statistics By Karl Russell '20 promoting flexible monetary policy self correction of the economy reduction in the fed funds rates increased in stock purchases Refer to the accompanying graph. Why did the Fed resort to quantitative tightening or easing? FRED ~ Millions of U.S. Dollars 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 -1,000,000 Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level Assets: Securities Held Outright: Mortgage-Backed Securities: Wednesday Level Assets: Securities Held Outright: U.S. Treasury Securities: Wednesday Level 2010 2015 2020 Source: Board of Governors of the Federal Reserve System (US) Customize | Download Data conventional monetary policy reached its bound the Fed wanted to surprise the markets none of the above the Fed was incompetent Question 21 5 pts The Fed recent rate hiking is the most significant since the 1980s. Such a series of rapid hikes will have a significant impact on the banking system because: a golden opportunity of bank profits an increase in economic activity a lower credit card rates and mortgage rates a fundamental restructuring of the global financial system is required Question 22 10 pts Assume the following economic indicators: PAE = 1,010 - 1,500r+ 0.5 Y interest rate is 10% short-run equilibrium output is $4,800 potential output is $4,500 multiplier of 5 Question: Calculate the fed funds rate that the Fed should target Round your answer (e.g. if your answer is 0.546, only enter 0.55). DO NOT include any $ sign, commas or other symbols