When inflation raises the nominal wage, and all other prices in the economy by the same percentage, an individual's:

Question 4 options:

1)	real wage increases.

2)	real wage decreases.

3)	real wage is unchanged.

4)	real buying power decreases.

Question 5 (2 points)

Suppose the economy is producing an output level equal to potential output, and for some reason the Fed wants to stimulate the economy, but it doesnt want to increasing inflation. What is the best strategy for achieving this?

Question 5 options:

1)	reducing interest rates

2)	keeping interest rates constant

3)	increasing interest rates

4)	the Fed cannot simultaneously stimulate the economy without driving up inflation.

Question 6 (2 points)

According to the Board of Governors in August 2008, the money multiplier was 1.31, reserves were $44 billion, and currency in circulation was $777 billion. What was the money supply?

Question 6 options:

1)	$1,076 billion

2)	$1,019 billion

3)	$625.85 billion

4)	There is not enough information provided to answer the question.

Question 7 (2 points)

Which of the following institutions determines the federal funds rate?

Question 7 options:

1)	Office of the Comptroller of the Currency.

2)	The Federal Deposit Insurance Corporation.

3)	The Board of Governors of the Federal Reserve System.

4)	The Federal Open Markets Committee.

Question 8 (2 points)

If the Fed thinks the economy's output is below its potential because it incorrectly measures ________, it runs the risk of ________.

Question 8 options:

1)	the natural rate of unemployment; pushing inflation above its target

2)	the real interest rate; increasing the natural rate of unemployment

3)	the natural rate of unemployment; pushing the economy into recession

4)	last period's inflation rate; changing the target inflation rate

Question 9 (2 points)

Monetary policy is difficult to conduct in the real world because:

Question 9 options:

1)	the models are well defined, but the interpretation is difficult.

2)	we don't know the Taylor rule policy coefficients.

3)	uncertainty in the economy's behavior leads to policy mistakes.

4)	the economy is completely random.