Exam 17: Monetary Policy

All else equal, an increase in the real GDP in the economy leads to a _____ shift in the money _____ curve.

If the Federal Reserve sells securities in the open market, the money supply will _____, which leads to _____ in the interest rate.

Using the equation of exchange, explain why the critics of monetarists claim that discretionary monetary policy can be used to bring an economy out of a recession.

Reserve requirements are the percentage of deposits that banks:

If the Federal Reserve wants to decrease the total spending in the economy, it can either _____ Treasury securities or _____ the reserve requirement.

Which of the following statements is NOT true?

All else equal, if the price level in an economy increases, then the equilibrium interest rate will _____. In this case, the Federal Reserve can _____ the money supply to bring the interest rate back to its original level.

An increase in the discount rate _____ the interest rate that banks charge their customers, which leads to _____ in the total spending in the economy.

All else equal, a higher interest rate implies a _____ quantity of money demanded and therefore a ____ the money demand curve.

Assume that all money in the economy is deposited with banks and that banks hold no excess reserves. If the reserve requirement for banks is 10 percent and the Federal Reserve wants to increase money supply by $50 million, then the Fed must _____ million worth of Treasury securities.

All else equal, if the Federal Reserve sells Treasury securities in the open market, then the money supply curve will shift _____, and the equilibrium interest rate will:

How many members constitute the Board of Governors of the Federal Reserve System?

A decrease in the money supply _____ the interest rate and ______ aggregate demand.

The number of times that the average unit of currency is spent in one year is known as the:

All else equal, if the Federal Reserve follows an expansionary monetary policy, then the money supply curve will shift _____, and the equilibrium interest rate will:

All else equal, a lower price level implies a lower _____ demand for money and therefore a _____ shift in the money demand curve.

According to the quantity theory of money, if the Federal Reserve increases money supply by 10 percent, then the price level will _____ by 10 percent, and real GDP will:

Monetary policy refers to the policies that the Federal Reserve uses to manage _____ and _____ in efforts to stabilize the economy.

A decrease in the discount rate _____ the interest rate that banks charge their customers, which leads to _____ in the total spending in the economy.

Contractionary monetary policy _____ the interest rate and _____ investment spending by firms.