Exam 14: Monetary Policy

Within the market for reserves, an increase in the quantity of reserves results in a

When the Fed raises the federal funds rate, other

In the short run, the Fed's actions to fight inflation shift the aggregate demand curve leftward.

A decrease in the federal funds rate leads to

The Federal Reserve fights recession via open market operations, the supply of loanable funds curve shifts ________ and the aggregate demand curve shifts ________.

In October 2008, central banks around the world coordinated a decrease in interest rates. Ben Bernanke, then Chairman of the Federal Reserve, stated that "policy makers will remain in close contact, monitor developments closely and stand ready to take additional steps should conditions warrant." If all the banks enacted the policy simultaneously, which of the following expenditure components would increase in the United States? I.exports II.consumption III.investment

In 2012, the Federal Reserve announced that it would hold the federal fund rates near 0 percent "at least through mid-2015." This policy attempted to shift the

The less sensitive to the interest rate are consumption expenditure and investment, the smaller is the shift in the AD curve when the Fed changes the federal funds rate.

Monetary policy produces ripple effects, some of which happen quickly and some that can take years to produce change. Which of the following takes the longest to change?

Which of the following is a potential monetary policy instrument for the Fed?

When the output gap is positive, it represents ________ gap, and when it is negative, it represents ________ gap.

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

In an effort to address the troubled economy, ..."For the ninth time in just over a year, the Federal Reserve is expected to cut interest rates, quite possibly its last reduction in this downturn." Rates have not been this low "... since 2003, when the economy was growing at a snail's pace." Www)csmonitor.com, 10/28/2008 The Fed's rate cuts will ________ bank reserves and ________.

Suppose that the inflation rate is 3 percent and the output gap is -1 percent. Assuming that the equilibrium real interest rate is 2 percent, what target should the Fed set for the federal funds rate, if the Taylor rule is used?

Price level stability

If the Fed is concerned with recession it will ________ the federal funds rate in order to ________ aggregate demand.

When the Federal Reserve fights inflation via open market operations, the supply of loanable funds curve shifts ________ and the aggregate demand curve shifts ________.

If the Fed buys U.S. government securities

To lower the federal funds rate, the Federal Reserve should

In an effort to address the troubled economy, ..."For the ninth time in just over a year, the Federal Reserve is expected to cut interest rates, quite possibly its last reduction in this downturn." Rates have not been this low "... since 2003, when the economy was growing at a snail's pace." Www)csmonitor.com, 10/28/2008 These rate cuts are designed to