Exam 17: Monetary Policy

When the exchange rate falls, imports ________ and exports ________.

If the Fed carries out an open market operation and buys U.S.government securities, the federal funds rate ________ and the quantity of reserves ________.

When a central bank targets inflation, its inflation targets are usually specified as

If the Fed buys government securities, other things the same, the exchange rate ________ and U.S.exports ________.

Inflation targeting requires that the central bank

The rightward shift of the RS curve will lead to a ________ in the real interest rate, ________ in investment, and ________ in aggregate demand.

Which of the following statements are correct? i. The Federal Reserve's monetary policy must be approved by the President of the United States . ii. The Federal Reserve Board of Directors meets approximately every six months to review the state of the economy and determine monetary policy. iii. The Federal Reserve has determined it will use the monetary base as its policy instrument.

The Federal Reserve fears that the United States economy is growing too slowly and is stuck in a recession.To move the economy back to its potential GDP, the most likely policy action for the Fed is to ________ the federal funds and thus ________.

In the United States,

To change the federal funds rate, the Fed

"When the Fed is concerned with an inflationary gap it buys government securities." Is the previous statement correct or incorrect? Explain your answer.

If there is an inflationary gap, what is the proper monetary policy to restore price stability? What actions can the Fed undertake to restore price stability?

A hike in the federal funds rate results in ________ in the real interest rate which leads to a ________ in investment.

When real GDP is greater than potential GDP, there is ________ which leads the inflation rate to ________.

When the economy is in recession, does the Fed want to raise the federal funds rate so as to increase aggregate demand and increase real GDP? Explain your answer.

Suppose the Fed raises the federal funds rate.Put the following changes in order in which they occur, starting with the changes that take place almost immediately and ending with the changes that may occur up to two years afterwards: i. short-term interest rates rise Ii) long-term interest real interest rate rises Iii) aggregate demand decreases Iv) inflation rate decreases

When the Fed lowers the federal funds rate and the real interest rate falls, what happens to the opportunity cost of investment? What happens to investment?

The Fed ________ influence the real interest rate in the short run and ________ influence the real interest rate in the long run.

To determine whether the goal of stable prices is being achieved, the Federal Reserve monitors

As the Fed lowers the federal funds rate,