Exam 14: Monetary Policy

When the Fed raises the federal funds rate

In September 2012 the Fed announced that because of weak labor market conditions, it would ________ $40 billion of mortgage backed securities per month. Critics of the action said that banks have ________ excessive reserves so the action would be futile.

In 2014, the federal funds rate was 0.15 percent, which means that the opportunity cost of holding reserves was ________ and consequently banks had a ________ incentive to economize on reserves.

In the short run, monetary policy can

If the Fed follows the Taylor rule and the economy goes into a recession, the Fed would

Explain how the Fed's response to inflation works its way through the economy to ultimately affecting real GDP and the price level.

To determine whether the goal of stable prices is being achieved, the Federal Reserve monitors the ________ but uses as its operational guide the ________.

When would the Fed want to carry out a monetary policy that decreases aggregate demand?

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 "interest rates" the Fed is cutting is the ________.

Usually, the Federal Reserve changes its target for the federal funds rate in units of

In September 2012 unemployment was high and the Fed was concerned that the economy would re-enter a recession. Therefore the Fed announced that it would ________ its purchases of securities in an effort to ________.

If the Fed carries out an open market operation to buy U.S. government securities, the federal funds rate ________ and the quantity of reserves ________.

The Federal Open Market Committee meets ________ times per year.

An increase in the quantity of reserves leads to a

In November 2008, the Reserve Bank of India (RBI)lowered its "repo" rate, the rate at which it lends to banks, from 8 percent to 7.5 percent. Only two weeks earlier, it had lowered the rate from 9 percent to 8 percent. The Economist, 11/6/2008 In its attempt to change real GDP, which of following sequences CORRECTLY describes the transmission of RBI's monetary policy? I.The real interest rate falls. II.The money supply increases. III.Bank reserves increase. IV.Supply of loanable funds increases. V.Aggregate demand increases.

Federal Reserve open market operations directly influence

Ben Bernanke (the 14th Chairman of the Fed)has been more precise than his predecessor, suggesting a core inflation rate of ________ per year as being the 'equivalent' to price stability.

An inflation rate targeting rule

The short-run effect of lowering the federal funds rate

In the short run, a decrease in the federal funds rate by the Fed