Exam 14: The Federal Reserve and Monetary Policy

A decrease in the required reserve ratio:

If the Fed reduces the money supply to reduce inflation:

Because the Fed can meet anytime in addition to the 8 scheduled meetings every year, and because the Fed can implement policy changes during any of these meetings, it follows that:

Figure 14.1 -Refer to Figure 14.1. A movement from Point A to Point D can be caused by:

All else constant, if the GDP in an economy decreases then:

All else constant, if the economy in experiences a deflation, then:

Figure 14.4 -Refer to Figure 14.4. If the Fed wants to reduce the economy's market interest rate from 6 percent to 4 percent, it needs to _______.

What will happen to the equilibrium interest rate when both the money supply and real GDP decrease?

Figure 14.5 -Refer to Figure 14.5. Assume the interest rate equals 8% and the money supply decreases from to If the interest rate remains at 8% :

For a given interest rate, a higher level of output means an increase in the number of transactions and an increase in the demand for money.

When the Fed conducts open market sales, the:

The price of a bond is equal to:

The speculative demand for money is:

Explain why the Fed does not often choose to use the discount rate to control the money supply.

When the economy is in a recession and the stock market plunges, the interest rates _______ and the bond prices _______ .

The amount of time it takes a given policy action to bring about a change in the state of the economy is called the:

The _______ the interest rate, the _______ the opportunity cost of holding money, and the _______ money people will want to hold.

In terms of the demand for money, the interest rate is:

Assume the money market is initially in equilibrium. Now, suppose that the price level falls. Graphically illustrate and explain what effect this reduction in the aggregate price level will have on the money market.

Excess supply in the money market causes: