Exam 15: Monetary Policy

Usually there is an inverse relationship between the federal funds rate and the output gap.

Long-term interest rates apply to financial assets that mature a number of years in the future.

In 2007, the Fed raised its target federal funds rate to prevent unemployment and a recession.

The fact that many stores in the United States have found it economical to accept credit cards has:

If the economy is at potential output and the Fed increases the money supply so that actual output exceeds potential output, eventually nominal wages will:

Inflation targeting occurs when the central bank sets an explicit goal for the inflation rate and uses monetary policy to hit that goal.

To close a recessionary gap using monetary policy, the Federal Reserve should _____ the money supply to _____ investment and consumer spending and shift the aggregate demand curve to the _____.

In the long run, an increase in the quantity of money:

Use the following to answer questions: Figure: The Money Supply and Aggregate Demand -(Figure: The Money Supply and Aggregate Demand) Refer to Figure: The Money Supply and Aggregate Demand. Panel _____ illustrates what happens when the Fed decides to _____ Treasury bills and _____ the money supply.

If the economy is at potential output and the Fed increases the money supply, in the long run real GDP will likely:

Assume the money supply doubles, followed by a doubling of the wage rate and the price level. Under these circumstances, we can safely conclude that:

Now that fast food places such as McDonald's are accepting credit card payments, the:

Use the following to answer questions: Figure: Monetary Policy II -(Figure: Monetary Policy II) Refer to Figure: Monetary Policy II. If the short-run equilibrium is at Y₂, appropriate central bank policy is:

In the liquidity preference model, the money supply is represented by a(n):

To fight a recession, the Federal Reserve should conduct _____ monetary policy to _____ interest rates, which will shift the aggregate demand curve to the _____.

Improvements in information technology have:

If the economy is at potential output and the Fed decreases the money supply, in the LONG run real GDP will likely:

Given a recessionary gap, the Federal Reserve will use monetary policy to _____ interest rates and _____ aggregate demand.

Monetary policy is similar among wealthy countries because the central banks of most countries:

Inflation targeting is different from the Taylor rule because the Taylor rule is based on a forecast of inflation, but inflation targeting adjusts monetary policy to past inflation.