Exam 15: Monetary Policy

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the Federal Reserve to conduct an expansionary monetary policy.Briefly explain the condition of the economy and what the Federal Reserve is attempting to do.

The Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association were established by Congress in order to regulate banks that buy and sell mortgage-backed securities.

In March 2008,the Fed announced that primary dealers would be eligible to receive discount loans.

From an initial long-run macroeconomic equilibrium,if the Federal Reserve anticipated that next year aggregate demand would grow significantly faster than long-run aggregate supply,then the Federal Reserve would most likely

From an initial long-run macroeconomic equilibrium,if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply,then the Federal Reserve would most likely

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

Figure 15-13 -Refer to Figure 15-13.In the figure above,if the economy in Year 1 is at point A and expected in Year 2 to be at point B,then the appropriate monetary policy by the Federal Reserve would be to

The Fed can directly lower the inflation rate.

The relationship between GDP and the money supply has gotten stronger since the 1980s.

The goals of monetary policy tend to be interrelated.For example,when the Fed pursues the goal of ________,it also can achieve the goal of ________ simultaneously.

If the Fed buys Treasury bills,this will shift the

The Taylor rule accurately predicted the changes in the federal funds target during the period

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in long-run macroeconomic equilibrium.For Year 2,graph aggregate demand,long-run aggregate supply,and short-run aggregate supply such that the condition of the economy will induce the Federal Reserve to conduct a contractionary monetary policy.Briefly explain the condition of the economy and what the Federal Reserve is attempting to do.

If the Fed pursues expansionary monetary policy then

Table 15-2 -Refer to Table 15-2.Consider the hypothetical information in the table above for potential real GDP,real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy.If the Fed uses monetary policy successfully to keep real GDP at its potential level in 2015,which of the following will be higher than if the Fed had taken no action?

Table 15-3 -Refer to Table 15-3.Consider the hypothetical information in the table above for potential real GDP,real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy.If the Fed uses monetary policy successfully to keep real GDP at its potential level in 2015,which of the following will be lower than if the Fed had taken no action?

Figure 15-11 -Refer to Figure 15-11.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,the Federal Reserve would most likely

Use the money demand and money supply model to show the money market in equilibrium with an interest rate of 5 percent and the quantity of money of $800 billion.Suppose the Federal Reserve increases the money supply to $850 billion.At the previous equilibrium interest rate of 5 percent,will households and firms now be holding more money or less money than they want to hold,and will they be buying or selling short-term financial assets? At the new equilibrium interest rate,households and firms will desire to hold the entire $850 billion of the money supply.What causes households and firms to want to hold the additional $50 billion of the money supply?

Which of the following is true?

Changes in interest rates affect all four components of aggregate demand.