1. If we are producing inside our production possibility curve, what type of policy should the Federal Reserve carry out?*

Expansionary fiscal

Expansionary monetary

Contractionary fiscal

Contractionary monetary

2. If the Fed decides to sell bonds, where is short-run equilibrium on the ADAS model prior to the sale?*

At potential output.

Below potential output.

Above potential output.

At full employment.

3. If the Fed decides to buy bonds, where is short-run equilibrium on the ADAS model prior to the purchase?*

At potential output.

Below potential output.

Above potential output.

At full employment.

4. Which of the following terms is LEAST associated with a need for expansionary monetary policy?*

Unemployment

Inflation

Recession

Contraction

5. Which of the following terms is MOST associated with a need for contractionary monetary policy?*

Unemployment

Inflation

Recession

Contraction

6. If we need expansionary monetary policy, where is the unemployment rate?*

Below the natural rate.

At the natural rate.

Above the natural rate

At full-employment.

7. If we need contractionary monetary policy, where is the unemployment rate?*

Below the natural rate.

At the natural rate.

Above the natural rate

At full-employment.

8. Attempting to produce outside our production possibilities curve results in a need for*

10 points

A Fed purchase of bonds.

A Fed sale of bonds.

A decrease in the required reserve ratio

A decrease in the discount rate.

9. Which of the following correctly summarizes the effects of expansionary monetary policy?*

Sell bonds = larger money supply = lower interest rates = less AD

Sell bonds = larger money supply = higher interest = less AD

Buy bonds = larger money supply = lower interest = more AD

Buy bonds = smaller money supply = lower interest = more AD

10. Which of the following correctly summarizes the effects of contractionary monetary policy?*

Sell bonds = smaller money supply = higher interest = more AD

Sell bonds = smaller money supply = higher interest = less AD

Buy bonds = larger money supply = lower interest = more AD

Buy bonds = larger money supply = higher interest = less AD