Exam 15: Monetary Policy

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is less than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

In the following table,fill in the columns for your return on investment if the price of your house increased or decreased by 20 percent,based on the down payments specified in the first column. Return on Your Investment From

Figure 15-3 -Refer to Figure 15-3.In the figure above,when the money supply shifts from MS₁ to MS₂,at the interest rate of 3 percent households and firms will

Figure 15-5 -Refer to Figure 15-5.In the figure above,the movement from point A to point B in the money market would be caused by

When the Federal Reserve increases the money supply,people spend more because interest rates fall.

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

The Federal Reserve cannot target both the money supply and the interest rate because it does not control

Figure 15-1 -Refer to Figure 15-1.In the figure above,the money demand curve would move from Money demand₁ to Money demand₂ if

Inflation targeting is a framework for carrying out monetary policy whereby

List the Fed's four main monetary policy goals.

The larger the fraction of an investment financed by borrowing

The relationship between GDP and the money supply has gotten stronger since the 1980s.

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

An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE

To reassure investors who were unwilling to buy mortgages in the secondary market,the U.S.Congress used two government sponsored enterprises,Fannie Mae and Freddie Mac,to stand between investors and banks that grant mortgages.Fannie Mae and Freddie Mac

Use the money demand and money supply model to show graphically and briefly explain the effect on the interest rate if real GDP increases.

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

Give an example of a monetary policy target.Explain why the Fed uses policy targets.

Despite saving Lehman Brothers from failing,the Fed and the Treasury decided to allow Bear Stearns to go bankrupt,which it did in September,2008.

By the height of the housing bubble in 2005 and early 2006,lenders had greatly loosened the standards for obtaining a mortgage loan,with many mortgages being granted to sub-prime borrowers ________ and "Alt-A" borrowers ________.