Exam 27: Monetary Policy

Open market sales will

The negative correlation between inflation and unemployment is observed because

Explain why independent central banks need to be held accountable.

A liquidity trap is a situation in which further increases in the money supply result in smaller reductions in the interest rate until the interest rate approaches zero.

The interest rate on loans banks pay when they borrow from the Fed is called

Answer the questions below:

Which of the following policies that the Fed followed between 2007 and 2014?

If the public believes the government's claim that it will pursue low inflation policies, and the government then turns around and adopts an expansionary policy, then

Describe in detail how the Fed takes action to lower the federal funds rate. If money demand is fixed, what happens to money supply?

If the Fed thinks there has been a positive wealth effect, what sort of change in monetary policy would it be likely to make? What happens if it does not make the change? Illustrate both cases graphically.

Describe the Goldilocks economy. If we are experiencing a Goldilocks economy, what is happening to interest rates?

One of the changes that the Fed has established as a result of the financial crisis is that it no longer carries private securities.

On the issue of central bank independence, evidence shows that

The Fed prefers to focus on the interest rate rather than growth in the money supply because

The negative correlation between inflation and unemployment is called the

Explain why interest rates cannot go negative.

The Fed's monetary policy responds mainly to changes in inflation.

Is the interest rate on the federal funds market, the federal funds rate, regulated by the Federal Reserve? Is the discount rate? Explain.

There is a positive relationship between interest rates and the money supply.

The policy by which the central bank keeps the growth of the money supply constant is referred to as a