Exam 14: Monetary Policy

If the Fed lowers the federal funds rate,the Fed's goal is to

-The figure above shows the market for bank reserves in Futureland.If the Bank of Futureland undertakes an open market sale of government securities that changes the quantity of reserves by $100 billion,then the federal funds rate will ________.

To determine whether the goal of stable prices is being achieved,the Federal Reserve monitors the ________ but uses as its operational guide the ________.

If the federal funds rate is greater than the federal funds rate target,there is a ________ of reserves and the federal funds rate ________.

An increase in the quantity of reserves leads to a

In the short run,the Fed's actions to fight inflation shift the

-In the above figure,suppose point C is the original equilibrium.If the Fed hikes the federal funds rate,the new equilibrium is given by point

A positive output gap is an inflationary gap.

In order to combat inflation,the Fed will ________ the federal funds rate thereby ________ the quantity of money.

Monetary policy includes adjustments in ________ so as to change ________.

Suppose that initially real GDP equals potential GDP.Then a decrease in aggregate demand occurs.According to the Taylor rule,the Fed should ________ the federal funds rate by ________ government securities in the open market.

Why does the Fed pursue price stability as its ultimate goal?

The ripple effects that occur when the Fed changes the federal funds rate include ________.

In December,the Bank of England reduced interest rates by another 50 basis points after points (a basis point is 0.01 percentage point) it had cut them by 150 basis points in November. But the rate cut may even be larger. Economists "...expect the Monetary Policy Committee [MPC] to cut rates to 2.5 percent,"...while others "...saw a bigger 75 point cut"...or "a 100 basis point move." Data show that "...inflation staged its biggest drop since records began ...potentially opening the door to even bigger cuts." Reuters,11/27/2008 If the Bank's policies given above can ________ the real long-term interest rate,the Bank will be able to ________.

If the Fed sells U.S.government securities,

Explain how the Fed's response to inflation works its through the economy to ultimately affecting real GDP and the price level.

Federal Reserve monetary policy goals include

The Federal Open Market Committee meets ________ times per year.

Uncertainty about monetary policy

The core inflation rate,measured by the core PCE deflator,measures changes in the