economics questions

which of the following will most likely be an intermidiate target of the monetary policy? a. discount rate b. monetary base c. 30 day tresuary bill rate d. commercial bank deposits at fed. bank what is the most likely effect on real gdp and un employment of a creadible announced inflation reduction by the fed. reserve? real gdp unemployment a. decrease decrease b. decrease no change c. No change decrease d. no change no change in the presence of automatic stabilisers as an economy slides into recession a. tax receipts incraese b. tax receipts decrease c govt increases tax rates\ d. govt decreases tax rates according to tax multiplier and the balanced budget multiplier will the greatest increase in aggregate demand most likely result from a tax cut or a govt purchases increase? Tax multiplier balanced budget multiplier a tax cut tax cut b. tax cut purchases increase c. purchases increase tax cut d. purchases increase purchases increase


amberpower- you got two right and two wrong but I will wait for others before i post the answers. hope the baby is doing well


  1. A - I would imagine the discount rate would be the intermediary target considering the Fed changes overnight rates. 2. D - I was looking for an unemployment increase in the options, but in the lack of that, I guess “no change” would be the best bet (probably because its already factored in) 3. B - Thats what automatic stabilizers do. 4. C ? - Cause Amber said so.

Baby seems to be doing great, me on the other hand with this exam…another story. I love economics, but this stuff is driving me NUTS! I have a feeling the second one is actually C.

I think the 2nd question also depends on whether or not we’re looking at the short-run or long-run…

Soxboys 21 !!! you got them all right. good shot. amber check on his/her posting for number 2.

Thanks, should have know that first one. And D makes sense for the last one b/c gov’t purchases have a ripple effect vs. a tax cut doesn’t spur more spending.

Now, if I could nail all those questions on the actual exam! :slight_smile:

  1. A - this is the only intermediate target of monetary policy. 2. B - I would think real GDP would go down as inflation goes down becasue of price will also go down and unemployment remain unchanged as supply and demand still will be in equlibrium. 3. B - I would think this is the only stabilizer 4 ?? I dont know what this is trying to say

If it’s an anticipated change, all things should remain stable…at least that was my thinking.


Economics is the only field in which two people can get a Nobel Prize for saying exactly the opposite thing

can you posthe correct ans audrey ?

Soxboys is correct he said.

The answer to Q1 should be B. Discount rate is NOT intermediate target it influence monetary base indirectly. See Volume 2, P 462

You’re right, for Q1 B is correct and (A) Discount rate is definitely wrong. But from the same text you quoted, it lists the fed funds rate (Choice D) as also an intermediate target. So, I think B and D are both correct. Unless you can argue that targeting commercial bank deposits at fed (Choice D) is not same as controling the fed funds rate, then B is the only answer.

Hey, that means i got 75%!!! D is wrong b/c monetary policy does not play around with the fed funds rate, they increase and decrease money supply.

thunder, check what soxboys wrote those are the answers