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

Explain how the Fed's use of its three tools of monetary policy affect supply and demand in the market for reserves and the equilibrium federal funds interest rate.

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

The demand curve for reserves shifts to the left and the federal funds rate falls when the Fed

The discount rate is

When there is a mismatch between job requirements and the skills of available workers, the resulting unemployment is called

An important lesson from the 2007-2009 financial crisis is that central banks and other regulators should have a laissez-faire attitude and let credit-driven bubbles proceed without any reaction. Intervention is always a mistake.

The type of open market operation intended to offset movements in other factors that affect reserves and the monetary base is

An open market ________ leads to a(n)________ of reserves and deposits in the banking system and hence to a(n)________ of the monetary base and the money supply.

Describe the goals of the Federal Reserve. What happens when these goals come into conflict? How would one decide if lower inflation is more important than lower unemployment? Explain.

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

Describe an asset-price bubble.

The Fed is reluctant to use reserve requirements to control the money supply because

If the Federal Reserve wants to expand reserves in the banking system, it will

Although the goals of high employment and economic growth are closely related, policies can be specifically aimed at encouraging economic growth by

The Fed's monetary policy strategy can be described as follows:

Explain why the use of an interest rate targeting strategy may result in procyclical monetary growth.

An open market sale of securities by the Fed will

Which of the following is not a requirement in selecting an intermediate target?

Open market purchases by the Fed increase the supply of nonborrowed reserves.

Discount loans to banks experiencing severe liquidity problems are called