Exam 15: Monetary Policy

Use the following to answer questions: Figure: Changes in the Money Supply -(Figure: Changes in the Money Supply) Refer to Figure: Changes in the Money Supply. If the supply of money shifts from S₁ to S₂, the Federal Reserve must have _____ Treasury bills in the open market.

The main objective of contractionary monetary policy is to:

Quantitative easing occurs when instead of purchasing only short-term government debt, the Fed buys long-term government debt as well.

One advantage of inflation targeting over the Taylor rule is that the central bank's policy can be evaluated by seeing how close to the target actual inflation rates are.

When the Federal Reserve buys Treasury bills, this leads to a(n):

Use the following to answer questions: Figure: Short-Run Determination of the Interest Rate -(Figure: Short-Run Determination of the Interest Rate) Refer to Figure: Short-Run Determination of the Interest Rate. If the money supply is at MS₂ and the central bank sells Treasury bills, then in the short run the interest rate will:

If the Federal Reserve sets the federal funds rate on the basis of inflation and the output gap, then the Federal Reserve is following:

Use the following to answer questions: Figure: Economic Adjustments -(Figure: Economic Adjustments) Refer to Figure: Economic Adjustments. Assume that the economy is at point b. The effect of a decrease in the money supply is represented by a shift of the _____ curve to _____.

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

Which statement is FALSE?

When the Fed uses quantitative easing, it is:

Use the following to answer questions: Figure: Economic Adjustments -(Figure: Economic Adjustments) Refer to Figure: Economic Adjustments. Assume that the economy is at point c. The effect of an increase in the money supply is represented by a shift of the _____ curve to _____.

An increase in the money supply causes _____ in output in the short run and _____ in output in the long run.

Monetary policy that lowers the interest rate is called _____ because it _____.

According to the liquidity preference model:

If during 2016 the interest rate on one-month Treasury bills was 2.5% and during 2017 it was 2%, the opportunity cost of holding money, assuming the inflation rate remained constant,:

When long-term rates are lower than short-term rates, the market is signaling that it expects short-term rates to fall.

Which reason is NOT one for which the Japanese tend to keep large amounts of cash?

If the quantity of money demanded is $100 billion and the quantity of money supplied is $200 billion, then the interest rate will:

U.S. banks did not offer interest on checking accounts until the beginning of the 1980s. Then banking regulations changed, allowing banks to pay interest on checking account funds. As a result, the _____ money _____ and shifted the money demand curve to the _____.