Exam 14: Monetary Policy

Ben Bernanke has been more precise than his predecessor, suggesting a core inflation rate of Per year is the same as price stability.

If the Fed increases the quantity of reserves, the federal funds rate _ and the quantity of money .

If core inflation is 2 percent, then most economists believe that

In November 2008, the Reserve Bank of India (RBI) lowered its "repo" rate, the rate at which it lends to banks, from 8 percent to 7.5 percent. Only two weeks earlier, it had lowered the rate from 9 percent to 8 percent. The Economist, 11/6/200 The Reserve Bank of India is lowering its rates to fight

If the Fed buys U.S. government securities,

When the Fed lowers the federal funds rate, it leads to

The Fed buys $50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its excess reserves?

Businesses become convinced that future profits from investment will be less than initially believed. This conviction leads to a change in aggregate _ _ and so the Fed should _ the federal funds rate if it wants to try to offset this change.

Consumer confidence in the economy falls, and as a result, aggregate demand decreases. As real GDP falls below potential GDP, if the Fed followed Friedman's k- percent rule, the Fed would

The People's Bank of China announced that it was lowering by 1.08 percentage points the one- year lending rate in response to the slowdown in the Chinese economy. This rate is the Chinese equivalent of the federal funds rate in the United States. HYPERLINK "http://www.nytimes.com/" www.nytimes.com, 11/26/20 Other things remaining the same, there will be a (n) in the exchange rate, a(n) in i and a(n) in exports.

What is Alan Greenspan's definition of price stability? Explain his definition.

Within the market for reserves, an increase in the quantity of reserves results in a

Suppose that the market for reserves is in equilibrium and then the Federal Reserve decreases the quantity of reserves by $2 billion. The federal funds rate will _ and the supply of loanable funds will _.

In the aggregate supply- aggregate demand model, raising the federal funds rate initially

If a central bank wants to implement a contractionary policy that decreases real GDP, it will conduct an open market operation by securities. Bank reserves will and bank lending will _ leading to a _ in the quantity of money.

A goal of monetary policy is .

The President of the United States is also the chairman of the Federal Reserve.

In the short run, a rise in the federal funds rate shifts the

Monetary policy affects real GDP by

An open market purchase of government securities by the Federal Reserve shifts the reserves curve .