Exam 14: Monetary Policy

The People's Bank of China announced that it was lowering by 1.08 percentage points the one-year lending rate in response to the slowdown in the Chinese economy. This rate is the Chinese equivalent of the federal funds rate in the United States. www.nytimes.com, 11/26/2008 Other things remaining the same, which of the following components will decrease in response to the bank's actions? i.exchange rate iI.interest rate iII.investment

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, the U.S. interest rate differential would ________ and so the U.S. exchange rate would ________.

If the U.S. interest rate rises, the exchange rate ________ and net exports ________.

The current chairman of the Federal Reserve is

If the Fed carries out an open market operation and sells U.S. government securities, the federal funds rate falls and the quantity of money increases.

The ripple effects that occur when the Fed changes the federal funds rate do NOT include ________.

The core inflation rate is more volatile than the total CPI inflation rate.