2 . As used in class, the "speed limit of the economy" is

Multiple Choice

• A. 65 MPH
• B. The growth of the labor force
• C. The long run potential growth rate
• D.a and c

3 . Federal Reserve independence is thought to

Multiple Choice

• A)introduce a short-term bias to monetary policymaking
• B)lead to better fiscal and monetary policy coordination
• C)introduce longer-run considerations to monetary policy making
• D)do both b and c

4 . All of the following are consequences of an economy operating above its potential level except:

Multiple Choice

• high rates of inflation.
• high interest rates.
• low unemployment.
• stable prices.

6 . One of the reasons Congress created the Second Bank of the United States was

Multiple Choice

• A. to help the federal government raise funds during the War of 1812
• B. to help the federal government raise funds during World War I
• C. to give states more control over the money supply process
• D. to help create more efficient check clearing process for banks
• E.a and d

7 . Monetary policy in the United States is under the control of:

Multiple Choice

• the U. S. Treasury.
• the President.
• the Federal Reserve.
• the U.S. Senate.

10 . The central bank has the ability to create money; this means it:

Multiple Choice

• can control the availability of money but not the availability of credit in the economy.
• can make loans only when other institutions can.
• can impact the rate of inflation.
• has an objective to maximize its profit.

11 . The main problem from inflation as seen by most economists is:

Multiple Choice

• inflation raises prices more than wages.
• inflation harms lenders more than it benefits borrowers.
• during periods of inflation some prices fall.
• inflation creates risk.

15 . The specific goals of central banks include all of the following except:

Multiple Choice

• high stock prices.
• low and stable inflation.
• high and stable real growth.
• a stable exchange rate.

17 . Central banks often find:

Multiple Choice

• they can efficiently pursue all of their goals simultaneously.
• there are tradeoffs that make pursuing all of their goals simultaneously impossible.
• the goal(s) they pursue will be determined by their profitability.
• they must keep their goals secret or else they cannot be attained.

18 . The specific goals of central banks include each of the following, except:

Multiple Choice

• high and stable real growth.
• low and stable inflation.
• high levels of exports.
• low and stable unemployment.

20 . The efficient allocation of resources requires:

Multiple Choice

• that prices reflect the relative value of goods and services.
• that inflation not exceed three percent a year.
• deflation.
• prices to remain constant.

22 . Stable inflation implies:

Multiple Choice

• that the rate of inflation averaged over many years is zero.
• that inflation is predictable.
• that the rate of inflation conceals relative price changes.
• low rates of unemployment.

23 .Most economists agree that the target rate of inflation for the central banks should be:

Multiple Choice

• between 7 and 9 percent.
• less than zero.
• above zero for fears of deflation.
• something over 3 but less than 6 percent.