Exam 15: Monetary Policy

The money demand curve has a

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

List the Fed's four main monetary goals.

An increase in interest rates

If the Fed orders a contractionary 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

Inflation targeting refers to conducting ________ policy so as to commit the central bank to achieving a ________.

The Fed uses a "core" price index,one that excludes food and energy prices to measure inflation.It does so because

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

Figure 26-5 -Refer to Figure 26-5.Suppose the economy is in a recession and the Fed pursues an expansionary monetary policy.Using the static AD-AS model in the figure above,this would be depicted as a movement from

Which of the following statements about inflation targeting is true?

A financial asset is considered a security if

In October 2008,Congress passed the ________,under which the Treasury provided funds to banks in exchange for stock.

Suppose that households became mistrustful of the banking system and decide to decrease their checking accounts and increase their holdings of currency.Using the money demand and money supply model and assuming everything else is held constant,the equilibrium interest rate should

Under the monetary growth rule proposed by the monetarists,the money supply would grow each year at a constant rate equal to the long-run rate of growth of

According to the Taylor rule,does the target for the federal funds rate respond differently for an increase in inflation caused by an increase in aggregate demand and for an increase in inflation caused by a decrease in short-run aggregate supply? Explain whether there is or is not a difference in how the target for the federal funds rate changes.

Would the Federal Reserve respond more aggressively with interest rate cuts in a recession caused by a decrease in spending,as in the 2001 recession,than in a recession caused by an increase in oil prices,as in the 1974-75 recession?

Figure 26-7 -Refer to Figure 26-7.In the dynamic AD-AS model,if the economy is at point A in year 1 and is expected to go to point B in year 2,the Federal Reserve would most likely

In response to already low interest rates doing little to stimulate the economy,the Fed announced a new program in September 2011 under which it would purchase long-term Treasury securities while selling an equal amount of shorter-term Treasury securities.This policy was known as

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

For purposes of monetary policy,the Federal Reserve has targeted the interest rate known as the