Exam 18:Monetary Policy: Stabilizing the Domestic Economy

 If the current market federal funds rate is in the target rate range and the demand for reserves decreases, the likely response in the federal funds market will be: ?

 One of the reasons primary credit exists is to: ?

 Given the following formula for the Taylor rule: ?Target federal funds rate = natural rate of interest + current inflation + ½(inflation gap) +½(output gap) If the current rate of inflation is 4%, natural rate of interest is 2%, and the target rate of inflation is 2%, and output is 3% above its potential, the target federal funds rate would be: ?

 The fact that, for most of its history, the Fed was reluctant to make discount loans actually: ?

Unconventional policy tools are useful when:

 Discuss what experience concerning required reserves occurred during the Great Depression that contributes to the decision today not to use required reserves as an active tool of monetary policy. 

Which of the following would be categorized as an unconventional monetary policy tool?

 The daily reserve supply curve is: ?

 For the European Central Bank (ECB), the equivalent of the FOMC's target federal funds rate is the: ?

 In 2002, the Federal Reserve changed its discount lending procedures. Which of the following statements is correct? ?

 An increase in the federal funds rate should: ?

 What are the advantages from the 2002 change in the Fed's lending policy? 

 The Taylor rule allows the real long-term interest rate to: ?

 The Fed is reluctant to change the required reserve rate because: ?

Quantitative easing is:

 Seasonal credit provided by the Fed is not as common as it used to be because: ?

 Today, reserve requirements are: ?

 Imagine the inflation rate begins to rise rapidly, the FOMC meets and it is believed that the target interest rate needed to stem the inflation could easily exceed 20 percent. Many members of the committee believe the Fed cannot announce this high of a target for political reasons. Discuss what the FOMC could do in terms of targets and what change occurred in 2002 that is going to make their job a bit more difficult. 

Targeted asset purchases are:

 The types of loans the Fed makes consist of each of the following, except: ?