Exam 14: Monetary Policy

-In the above figure, suppose point C is the original equilibrium. If the Fed increases the federal funds rate, the new equilibrium is given by point

-In the above figure, if the economy is initially at point a, the short-run effect of a cut in the federal funds rate is given by movement from point

"As the Fed Chases Inflation, Critics Shout, 'Faster!'" "For weeks, the Fed has broadcast its intention to raise interest rates glacially." The Fed was moving slowly, according to an economist because "...the declining price of oil, economic fundamentals, including productivity and global competition, will keep inflation in check." The Fed, recognizing that the economy was improving stated it planned to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." Other economists disagree with the Fed's restrained policy as a "mistake." Www)nytimes, 7/1/2004 The Fed's policy will ________ the quantity of money and ________ the supply of loanable funds.

Currently the Fed targets

If the Fed raises the interest rate, the first effect in an AS/AD figure is a ________ shift of the ________ curve.

By using open market operations, the Federal Reserve

Former Fed Chairman Ben Bernanke has suggested that a core inflation rate of ________ is the equivalent of price stability.

The core inflation rate is more volatile than the total CPI inflation rate.

To increase the quantity of money in the economy, the Federal Reserve is likely to