Exam 5: Monetary Policy in the United States

Observability refers to the notion that an operating target must have an expected connection with the intermediate target, which itself must eventually affect the economy in a way that is consistent with the Fed's goals.

Which of the below statements is FALSE?

The Fed's policy necessarily represents trade-offs among its various goals, which have different levels of relative importance at different times, depending on the state of the economy.

The Fed has numerous and complex goals related to conditions in the overall economy, which include price stability, high employment, economic growth, and stability in interest rates and the dollar's value in foreign currencies.

During the late 1990s and the 2000s, due to the moderately strong U.S. dollar, strong U.S. economic growth and weak or anemic economic growth in much of the rest of the world, the United States experienced a very large but decreasing trade deficit.

As of 1995, what did the Fed succeed in doing?

Which of the below statements is FALSE?

The Fed, like any monetary policy maker, has numerous goals but focuses, at any time, on the goal ________.

In the Keynesian view, the Fed's decision to reduce the fed funds rate, by increasing the banking system's excess reserves, should have certain consequences. Explain these consequences.

Although economists have argued many years about the identity of appropriate operating and intermediate target variables, there is no dispute about the chief characteristics of a suitable operating or intermediate target. Which of the below is NOT a chief characteristic?

It is important to note that, when confronted with a supply shock, a central bank such as the Fed has two choices. Which of the below is ONE of these choices?