Exam 15: Monetary Policy

By the 2000s,an important change in the mortgage market had occurred when ________ became significant participants in the secondary market for mortgages.

The Federal Reserve's two main ________ are the money supply and the interest rate.

If the Fed lowers its target for the federal funds rate,this indicates that

Increases in the price level

Hovnanain Enterprises,a residential home builder based in New Jersey,did well during the mid-2000s but did not do so well in during and immediately after the recession of 2007-2009.The reason for this is

Figure 15-1 -Refer to Figure 15-1.In the figure,the money demand curve would move from Money demand₁ to Money demand₂ if

In response to already low interest rates doing little to stimulate the economy,the Fed began buying 10-year Treasury notes and certain mortgage-backed securities to keep interest rates low.This policy is known as

With a monetary growth rule as proposed by the monetarists,during a recession the rate of growth of the money supply would

Table 15-4 -Refer to Table 15-4.Suppose the following table illustrates the values of real and potential GDP and the price level,if the Fed does not vote to change their current policy to be more contractionary or expansionary.If the Fed wants to keep real GDP at its potential level in 2015,should the Fed use a contractionary or expansionary policy? How should it conduct open market operations to achieve its goal?

What is a banking panic,and what role did banking panics play in the decision by Congress to establish the Federal Reserve?

Despite saving Lehman Brothers from failing,the Fed and the Treasury decided to allow Bear Stearns to go bankrupt,which it did in September,2008.

An argument in favor of the Federal Reserve adopting inflation targeting is that in the long run,the Fed can have an impact on inflation but not on real GDP.

Using the money demand and money supply model,an increase in money demand would cause the equilibrium interest rate to

Mortgage lenders often resell mortgages in secondary markets.How might this make lenders act differently than if they intended to hold the mortgages themselves?

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

Which of the following will lead to a decrease in the equilibrium interest rate in the economy?

Table 15-7 -Refer to Table 15-7.Suppose the table above illustrates the values of real and potential GDP and the price level,if the Fed did not vote to change their current policy to be more contractionary or expansionary.Suppose that the Fed used an appropriate policy and was successful in keeping real GDP at potential in 2013.Draw an aggregate demand and supply curve to illustrate your answer.