Exam 14: Monetary Policy

If the Fed lowers the federal funds rate, the Fedʹs goal is to

To determine whether the goal of stable prices is being achieved, the Federal Reserve monitors the___________ but uses as its operational guide the ___________.

Currently the Fed targets

In the aggregate demand/aggregate supply framework, lowering the federal funds rate has what short -run effects on real GDP?

In the market for bank reserves, if the federal funds rate target is higher than the federal funds rate, the Fed will take action to ___________reserves.

In the short run, the Fedʹs actions to fight an inflationary gap shift the

In the short run, the Fedʹs actions to fight inflation shift the aggregate demand curve leftward.

The central bank of Cobra sells securities in an open market operation. In the short run, aggregate demand__________ , real GDP__________ , and the price level __________.

In the short run, if the Fed wants to fight a recession, should it buy or sell government securities? Why?

The key goal of monetary policy is to

The key aim of monetary policy is to

ʺWhen the Fed is concerned with inflation, it buys government securities.ʺ Is the previous statement correct or incorrect? Explain your answer.

According to the AS/AD model, in the short run an increase in the federal funds rate will

Suppose the inflation rate is 3 percent and the output gap is -1 percent. Assuming the equilibrium real interest rate is 2 percent, using the Taylor rule, what target should the Fed set for the federal funds rate?

When the Federal Reserve lowers the federal funds rate, in the short run

An open market sale of government securities by the Federal Reserve shifts the ___________reserves curve___________ .

The Federal Reserve fights inflation via open market operations, the supply of loanable funds curve shifts____________ and the aggregate demand curve shifts ____________.

In an effort to address the troubled economy, ...ʺFor the ninth time in just over a year, the Federal Reserve is expected to cut interest rates, quite possibly its last reduction in this downturn.ʺ Rates have not been this low ʺ... since 2003, when the economy was growing at a snailʹs pace.ʺ The Fedʹs rates cuts will initially impact__________and eventually __________.

If the Fed fears inflation it will undertake an open market____________ of securities, the federal funds rate will ____________and the long-term real interest rate will____________ .

By using open market operations, the Federal Reserve