Exam 15: Monetary Policy

To reassure investors who were unwilling to buy mortgages in the secondary market,the U.S.Congress used two government sponsored enterprises,________,to sell bonds to investors and use the funds to purchase mortgages from banks.

In September 2011,the Fed announced a new policy in which it would invest in additional mortgage-backed securities in an attempt to further reduce mortgage rates and boost the housing market.Lower mortgage rates should lead to an increase in refinancing,which should increase ________ and therefore increase ________.

Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP.

In the following table,fill in the columns for your return on investment if the price of your house increased or decreased by 40 percent,based on the down payments specified in the first column. Return on Your Investment From…

If the Fed lowers its target for the federal funds rate,this indicates that

The Fed

If the Fed buys Treasury bills,this will shift the

Use the money demand and money supply model to show graphically and explain the effect on interest rates of the Federal Reserve's open market purchase of Treasury securities.

According to the Taylor rule,the Fed should set the target for the federal funds rate equal to the sum of the equilibrium real federal funds rate,the current inflation rate,one-half times the ________,and one-half times the ________.

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

Figure 26-3 -Refer to Figure 26-3.In the figure above,the movement from point A to point B in the money market would be caused by

The Taylor rule predicted a federal funds rate which was ________ that set when Paul Volcker was chairman of the Fed,and a rate which was ________ that set when Arthur Burns chaired the Fed.

The money demand curve has a negative slope because

Suppose that the economy is producing above potential GDP and the Fed implements the correct change in monetary policy,but not until after the economy has passed the peak of the boom.Then

Although the Federal Reserve had traditionally made discount loans only to ________,in response to to the financial crisis in 2008 the Fed made primary dealers eligible for discount loans as well.

Suppose you buy a house for $250,000.One year later,the market price for the house has fallen to $200,000.What is the return on your investment in the house if you made a down payment of 10 percent and took out a mortgage loan for the other 90 percent?

From an initial long-run macroeconomic equilibrium,if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply,then the Federal Reserve would most likely

What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?

By the 2000s,an important market change occurred when investment banks became significant participants in the secondary market for

If the Fed's policy is contractionary,it will