Exam 15: Monetary Policy

When the Fed uses contractionary policy

With a monetary growth rule as proposed by the monetarists,during a recession the rate of growth of the money supply would

Beginning in 2008,The Federal Reserve and the U.S.Treasury Department responded to the financial crisis by intervening in financial markets in unprecedented ways.Briefly summarize the 4 key actions of the Fed and Treasury.

A monetary policy target is a variable that the Fed can affect directly,which then affects one or more of the Fed's policy goals.

In reality,the Fed is unable to use monetary policy to keep real GDP exactly at its potential level.

If the Federal Reserve targets the money supply,and the money demand curve shifts to the left,then the Fed

The Fed uses a "core" price index,one that excludes food and energy prices to measure inflation.It does so because

Suppose the Fed decreases the money supply.In response households and firms will ________ short term assets and this will drive ________ interest rates.

The Federal Reserve can directly affect its monetary policy ________,which then affect its monetary policy ________.

While many analysts defended the actions taken by the Fed and the Treasury to respond to the financial crisis in 2008,others were critical of these actions.The critics were concerned that by not allowing large firms to fail

According to the Taylor rule,the Fed should set the target for the federal funds rate equal to the sum of the equilibrium real federal funds rate,the current inflation rate,one-half times the ________,and one-half times the ________.

A repurchase agreement is the same as an open market purchase of Treasury securities.

Which of the following describes what the Fed would do to pursue an expansionary monetary policy?

With the federal funds rate near zero and the economy still struggling,in response to already low interest rates doing little to stimulate the economy,the Fed began buying 10-year Treasury notes and certain mortgage-backed securities to keep interest rates low.This policy is known as

The Federal Reserve does not target both the money supply and an interest rate because

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

Inflation targeting refers to conducting ________ policy so as to commit the central bank to achieving a ________.

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Firms that participate in regular open market transactions with the Federal Reserve are called

In the Taylor rule,does the target for the federal funds rate respond differently for a recession caused by a decrease in aggregate demand and for a recession caused by a decrease in short-run aggregate supply? Explain whether there is or is not a difference in how the target for the federal funds rate changes.