Exam 30: Monetary Policy: Conventional and Unconventional

How are Treasury bond prices affected when the interest rate rises?

Stock prices fell throughout much of 2007 and 2008 and many investors decided to switch their funds into the bond market.What only about 30 percent of surveyed investors knew was that as bond prices rise, interest rates

The creation of new bank reserves could lead to a multiple increase in the money supply.

If the FOMC orders the sale of T-bills in the open market, then bank reserves are

Open market operations generally involve the purchase and sales of

The Federal Reserve System can be described as a bank for bankers.

The demand for reserves increases as the price level rises because

Members of the Board of Governors of the Fed are

The Federal Open Market Committee consists of

Figure 13-1 -In Figure 13-1, which panel shows the effect of inflation on the interest rate?

What will happen to the demand for reserves if real GDP increases?

The Federal Reserve's principal tool in the manipulation of aggregate demand is the personal income tax.

Member banks of the Federal Reserve System

To decrease the money supply, the Fed purchases government securities, which decreases government spending.

If the Fed reduces the required reserve ratio,

Part of the reason that people confuse money and income is because

The tool most frequently relied on by the Fed is

To increase the money supply, the Fed purchases government securities from banks, paying for them with new reserves.

If the Fed decides to buy T-bills, it increases the demand for T-bills.How will this affect the price of T-bills and the interest rate?

The Fed frequently uses the discount rate and the required reserve ratio as instruments of monetary policy.