Exam 15: Monetary Policy

By the height of the housing bubble in 2005 and early 2006,lenders had greatly loosened the standards for obtaining a mortgage loan,with many mortgages being granted to sub-prime borrowers ________ and "Alt-A" borrowers ________.

What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?

Rising nominal GDP will increase the demand for money and short-term interest rates.

An advantage of the personal consumption expenditures price index (PCE)over the Consumer Price Index (CPI)as a measure of inflation is that the PCE

A borrower defaults on a loan when he stops making payments on the loan.

The Federal Reserve cannot target both the money supply and the interest rate because it does not control

An increase in interest rates

To reassure investors who were unwilling to buy mortgages in the secondary market,the U.S.Congress used two government sponsored enterprises,________,to sell bonds to investors and use the funds to purchase mortgages from banks.

Most of the pressure for a monetary growth rule has disappeared because since 1980,

Using the money demand and money supply model,an open market purchase of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to

Figure 15-7 -Refer to Figure 15-7.Suppose the economy is in a recession and the Fed pursues an expansionary monetary policy.Using the static AD-AS model in the figure above,this would be depicted as a movement from

When housing prices fall,as they did beginning in 2006 following the housing market bubble,consumption spending on furniture,appliances,and home improvements ________ as many households found it ________ to borrow against the value of their homes.

The larger the fraction of an investment financed by borrowing,

Why doesn't the Fed have both a money supply target and an interest rate target?

In 2008,the Treasury and Federal Reserve took several actions in response to the deepening financial crisis.One action was the creation of the Term Securities Lending Facility,under which the Fed will loan up to $200 billion of treasury securities in exchange for

Monetary policy could be procyclical if the Federal Reserve

Most economists believe that the best monetary policy target is

Monetary policy refers to the actions the

The Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is not one of the ways the Fed responded?

A monetary policy target is a variable that