Exam 5: Monetary Policy

In 2012, the Fed stated that it would continue to purchase Treasury bonds in the financial markets until GDP growth increased to a target level.

According to the theory of rational expectations, higher inflationary expectations encourage businesses and households to reduce their demand for loanable funds.

The intent of the Fed's operation twist strategy in 2011 and 2012 was to:

The Fed's main focus in the years 2010-2014 following the credit crisis was on controlling inflation.

A credit crunch occurs when:

A ____ dollar tends to exert inflationary pressure in the United States.

If a firm has a credit risk premium of 3 percent and the Treasury security rate is 4 percent, the firm will be able to borrow at ________. If the Fed implements a monetary policy that raisestheTreasury security rate to 6 percent, the cost of borrowing for the firm will be ________.

There is some evidence that high money supply growth may lead to _______ U.S. inflation over time, which in turn places ____ pressure on U.S. interest rates.

The interest rate that the Fed targets for its monetary policy is the:

Economists who work at the Fed recognize that a stimulative monetary policy will not always reduce a high unemployment rate and could even ignite inflation.

Which of the following is not an indicator of inflation?

When the Fed uses open market operations to sell some of its Treasury securities, there will be

To correct excessive inflation, the Fed could use open market operations by buying Treasury securities in the secondary market.

The Fed's monetary policy is commonly intended to alter the supply of funds in the banking system in order to achieve a specific targeted:

If the Fed uses a passive monetary policy during weak economic conditions,