Exam 17: Monetary Policy

Table 17-6 Year Potential Real GDP Real GDP Price Level 2014 \ 15.1 trillion \ 15.1 trillion 150 2015 15.4 trillion 15.6 trillion 155 -Refer to Table 17-6.Suppose the table above illustrates the values of real and potential GDP and the price level,if the Fed does not vote to change their current policy to be more contractionary or expansionary.If the Fed wants to keep real GDP at its potential level in 2015,should the Fed use a contractionary or expansionary policy? Should it raise or lower its interest rate target? How should it conduct open market operations to achieve its goal?

Table 17-3 Year Potential Real GDP Real GDP Price Level 2014 \ 14.0 trillion \ 14.0 trillion 150 2015 14.5 trillion 14.8 trillion 154 -Refer to Table 17-3.Consider the hypothetical information in the table above for potential real GDP,real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy.If the Fed wants to keep real GDP at its potential level in 2015,it should

If the Federal Reserve targets the money supply,and the money demand curve shifts to the left,then the Fed

The Federal Reserve cannot target both the money supply and the interest rate because it does not control

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP equals potential GDP,then the federal funds target rate equals the

The Federal Reserve does not target both the money supply and an interest rate because

When housing prices ________,as they did beginning in 2006 following the housing market bubble,consumption spending on furniture,appliances,and home improvements declined as many households found it ________ to borrow against the value of their homes.

To reassure investors who were unwilling to buy mortgages in the secondary market,the U.S.Congress used two government sponsored enterprises,Fannie Mae and Freddie Mac,to stand between investors and banks that grant mortgages.Fannie Mae and Freddie Mac

The Federal Reserve System's four monetary policy goals are

Figure 17-11 -Refer to Figure 17-11.In the dynamic model of AD-AS in the figure above,the economy is at point A in year 1 and is expected to go to point B in year 2,and the Federal Reserve pursues policy.This will result in

The economy suffered a mild recession in 2001.Despite the recession,home sales and durable goods sales remained high.Which of the following is a plausible explanation?

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

The ability of the Federal Reserve to use monetary policy to affect economic variables such as real GDP ultimately depends upon its ability to affect

The Taylor rule helps explain the relationship between the Fed's ________ and ________.

In October 2008,Congress passed the Troubled Asset Relief Program (TARP),under which the Treasury provided ________ to banks in exchange for ________.

Ceteris paribus,an increase in the money supply will lower short-term interest rates.

If the Fed orders an expansionary monetary policy,describe what will happen to the following variables relative to what would have happened without the policy: a.The money supply b.Interest rates c.Investment d.Consumption e.Net Exports f.The aggregate demand curve g.Real GDP h.The price level

If the amount you owe on your house is greater than the price of the house,you have

How do economists generally rate the Fed's performance in the 1980s,1990s,and the early 2000s? Has the public been supportive of their policies? Is there anything on the horizon for the Fed that might cause the public concern?

The smaller the fraction of an investment financed by borrowing,