How the Fed Works: After the Great Recession Practice Questions | Marginal Revolution University

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Practice Questions

How the Fed Works: After the Great Recession Practice Questions

1. What is quantitative easing? *

a. When the Fed swaps money with banks for assets other than treasury bills.

b. When the Fed changes the federal funds rate more slowly, so as to prevent a sudden shock to the economy.

c. Open market operations that happen overnight at the Fed’s sole discretion.

d. The Fed’s new ability to set interest rates directly, without having to go through transactions with banks.

2. What is one reason open market operations stopped being as effective during and after the Great Recession? *

a. With interest rates near zero, it became nearly impossible to impact the economy by lowering the federal funds rate.

b. Banks are now legally mandated to hold higher reserves, making a federal funds market unnecessary.

c. After the Great Recession, major firms began to account for changes in the federal funds rate, cancelling their effect.

d. The Fed can now directly set the federal funds rate, making market operations unnecessary.

3. With quantitative easing, the Fed can now ____________. *

a. See the impact of its policies before it’s too late to reverse them

b. Directly influence particular sectors of the economy

c. Directly swap assets with banks overnight

d. Simply set interest rates without having to carry out purchases in a market

4. How does the Fed now influence how much banks hold in reserves? *

a. By setting a legal reserve maximum.

b. By subsidizing any amount under the target amount.

c. By targeting longer-term interest rates, decreasing their influence on reserves.

d. By paying interest on reserves.

5. Reverse repurchase agreements are like temporary ___________. *

a. Expansionary open market operations.

b. Contractionary open market operations.

c. Interest rates.

d. Free trade agreements between banks and the Fed.

6. Which of the following is an important difference between repos and OMOs? *

a. Banks have no say in whether to participate in repos.

b. Repos swap money for other assets besides treasury bills.

c. Repos have a shorter term impact on the economy.

d. Repos are also conducted with other financial institutions besides banks.

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Principles of Economics Macroeconomics

Course (86 videos)

GDP

What Is Gross Domestic Product (GDP)?

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Nominal vs. Real GDP

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Real GDP Per Capita and the Standard of Living

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The Wealth of Nations and Economic Growth

Basic Facts of Wealth

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Growth Rates Are Crucial

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What Caused the Industrial Revolution?

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Growth Miracles and Growth Disasters

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The Importance of Institutions

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Geography and Economic Growth

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The Puzzle of Growth

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Growth, Capital Accumulation, and the Economics of Ideas

Introduction to the Solow Model

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Physical Capital and Diminishing Returns

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The Solow Model and the Steady State

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Office Hours: The Solow Model

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Human Capital and Conditional Convergence

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The Solow Model and Ideas

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Office Hours: The Solow Model: Investments vs. Ideas

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The Economics of Ideas

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Patents, Prizes, and Subsidies

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TED Talk: How Ideas Trump Crises

The Idea Equation

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Savings, Investment, and the Financial System

Saving and Borrowing

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What Do Banks Do?

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Intro to Stock Markets

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Intro to the Bond Market

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Office Hours: The Bond Market

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Four Reasons Financial Intermediaries Fail

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The Great Recession

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Personal Finance

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The Economics of Choosing the Right Career

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Defining the Unemployment Rate

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Is Unemployment Undercounted?

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Frictional Unemployment

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Structural Unemployment

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Cyclical Unemployment

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Labor Force Participation

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Measuring Inflation

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Quantity Theory of Money

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Causes of Inflation

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Costs of Inflation: Price Confusion and Money Illusion

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Costs of Inflation: Financial Intermediation Failure

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Office Hours: Costs of Inflation

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Why Governments Create Inflation

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Business Fluctuations

Intro to Business Fluctuations

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The Aggregate Demand Curve

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The Long-Run Aggregate Supply Curve

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The Short-Run Aggregate Supply Curve

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Changes in Velocity

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Understanding the Great Depression

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Office Hours: Using the AD-AS Model

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Office Hours: Multiple Shocks with the AD-AS Model

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Business Cycle Theories

Game of Theories: The Keynesians

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Game of Theories: The Monetarists

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Game of Theories: Real Business Cycle

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Game of Theories: The Austrians

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Game of Theories: The Great Recession

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Monetary Policy and the Federal Reserve

Monetary Policy and the Fed

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The U.S. Money Supplies

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The Money Multiplier

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How the Fed Worked: Before the Great Recession

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How the Fed Works: After the Great Recession

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The Federal Reserve as Lender of Last Resort

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Monetary Policy: The Best Case Scenario

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Monetary Policy: The Negative Real Shock Dilemma

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When the Fed Does Too Much

Fiscal Policy

Introduction to Fiscal Policy

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Fiscal Policy: The Best Case Scenario

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The Limits of Fiscal Policy

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The Dangers of Fiscal Policy

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Fiscal Policy and Crowding Out

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Principles of Economics: Macroeconomics

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