Exam 17: Monetary Policy

In the long run, the real interest rate is determined by

In order to raise the federal funds rate, the Fed ________ government securities in open market operations, so that banks' reserves ________ and the quantity of money ________.

In the short run, when the Fed increases the federal funds rate

Raising the federal funds rate shifts the aggregate demand curve ________ so that real GDP ________ and the price level ________.

One problem with the ripple effect from the Fed's monetary policy is

Currently the Fed targets

If the Federal Reserve decreases the Federal funds rate, other short-term interest rates ________ and the exchange rate ________.

When the Federal Reserve raises the federal funds rate, the quantity of reserves ________, the quantity of money ________, and the quantity of loans ________.

Which of the following is a potential monetary policy instrument for the Fed?

Which of the following are policy instruments available to the Fed as it tries to achieve its macroeconomic goals? i. government expenditure on goods and services and taxes ii. the government budget deficit or surplus iii. changes in the federal funds rate

Which of the following is NOT a monetary policy goal?

When the Fed buys government securities, banks' reserves ________, the quantity of money ________, and the federal funds rate ________.

If the Fed buys U.S.government securities from banks, the federal funds rate ________ and banks' reserves ________.

When the output gap is positive, it represents ________ gap, and when it is negative, it represents ________ gap.

The Fed decreases the quantity of money to counteract

If the Fed is concerned about a possible recession, it ________ the federal funds rate, which ________ the quantity of money and ________ the amount of bank loans.

To lower the federal funds rate, the Fed conducts an open market ________ of securities which ________.

To fight a recession, an appropriate monetary policy would be that the Fed conducts an open market operation that ________ government securities, ________ the federal funds rate, and ________ aggregate demand.

Discuss how the Fed selling securities in the open market ripples through the different sectors of the economy.

An instrument rule is based on ________ of the economy while a targeting rule is based on ________ of the economy.