Exam 10: Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

An open market sale leads to an expansion of reserves and deposits in the banking system and hence to a decline in the monetary base and the money supply.

Open market purchases by the Fed cause the federal funds rate to rise.

Discuss some of the issues central banks will face maintaining price stability as a short-run goal?

List and describe the various assets and liabilities making up the consolidated balance sheet of the Federal Reserve System.

The monetary base consists of

The first country to mandate that its central bank adopt inflation targeting was

An objective of the Federal Reserve in its conduct of monetary policy is high employment.

Which type of open market operation is intended to change the level of reserves?

The Fed's operating procedures and paying interest on reserves contains the federal funds rate between the interest rate paid on reserves and the discount rate.

Under usual circumstances,an increase in the discount rate causes

If the desired intermediate target is an interest rate,then the preferred operating target will be a(n)________ variable like the ________.

The supply curve for reserves is ________ when the federal funds rate is below the discount rate and ________ when the federal funds rate is above the discount rate.

If the Fed increases reserve requirements,the demand for reserves ________ and the equilibrium federal funds rate ________.

Which of the following is a potential operating target for the Fed?

The federal funds rate is an operating target.

Inflation targeting makes the central bank less accountable.

Distinguish between a hierarchical mandate and a dual mandate,with regard to central bank goals.

The natural rate of unemployment is not lowered by high inflation,so higher inflation cannot produce lower unemployment or more employment in the long run.

Describe and discuss Chairman Bernanke's views on inflation targeting and transparency in central banking.

What is the argument for the Fed paying interest to banks on required reserves? Are there good arguments for not doing this?