Exam 18: Monetary Policy: Stabilizing the Domestic Economy

On a particular day, the actual federal funds rate can deviate from the target federal funds rate.This might be due to all of the following except:

Could the Fed impact the amount of borrowing in the federal funds market without changing their target for the federal funds rate? Explain.

If the current rate of inflation is 4% and the target rate of inflation is 2%, and output is 3% above its potential, the target federal funds rate would be:

In 2001, the FOMC lowered the target federal funds rate eleven times, cutting the rate from 6½ percent to 1¾ percent.Why didn't the Fed just cut the rate by larger amounts early on?

In terms of desirable features of a monetary policy instrument, explain why the size of the staff at the Fed is not a good policy instrument.Be sure to address which feature(s) it fits and which one(s) it doesn't.

From 1979 to 1982, the Fed targeted bank reserves as the monetary policy tool.One side effect of this strategy was:

The ECB's temporary operations typically involve the use of:

When the Fed forecasts a sustained increase in the demand for the monetary base, the staff of the Fed is likely to meet this demand through:

If reserve demand is volatile, in order for the central bank to keep interest rates from being volatile, it must:

The reserve requirement does not meet all of the criteria of a good monetary policy tool, because it:

Which of the following statements is most correct?

The types of loans the Fed makes consist of each of the following, except:

The tool the Fed uses to keep the federal funds rate close to the target is:

The ways the Fed can inject reserves into the banking system include:

If output in the economy were to fall by an additional one percent below potential, the target federal funds rate would:

What is the consensus among economists and other monetary policy experts regarding the usefulness of the monetary policy instruments available to central banks in normal times?

The market for reserves derives from the fact that:

Given the following Taylor rule: Target federal funds rate = 2 + current inflation + ½(inflation gap) +½(output gap); Explain what happens to the real interest rate and why it happens, each time inflation increases by 1 percent.

Is discount lending used to keep banks from failing? Explain.

Which of the following statements is true?