Exam 15: Monetary Policy

The zero lower bound for interest rates is:

Use the following to answer questions : Figure: Monetary Policy and the AD-SRAS Model -(Figure: Monetary Policy and the AD-SRAS Model) Look at the figure Monetary Policy and the AD-SRAS Model. The economy may move from point i to point h as a result of:

If Congress places a $5 tax on each ATM transaction, there will likely be:

Use the following to answer questions : Figure: Monetary Policy and the AD-SRAS Model -(Figure: Monetary Policy and the AD-SRAS Model) Look at the figure Monetary Policy and the AD-SRAS Model. The economy could move from point g to point f as a result of:

The interest earnings one gives up to hold more liquid assets are:

When the Federal Reserve buys Treasury bills, this leads to:

Assume the money market is in equilibrium. The Federal Reserve Bank has decided to purchase Treasury bills in an open market operation. The result of this action will be a _____ in the interest rate as the money _____ shifts _____.

Use the following to answer questions : Figure: The Money Supply and Aggregate Demand -(Figure: The Money Supply and Aggregate Demand) Look at the figure The Money Supply and Aggregate Demand. If the economy is in a recessionary gap, the Federal Reserve will _____ Treasury bills, which will _____ the money supply and _____ interest rates. This is shown in panel _____.

Suppose a new regulation lowers the interest rates banks can offer on checking account funds. This will result in a shift _____ of the money _____ curve.

Since the short-run increase in the aggregate price level that follows a monetary expansion is smaller than the ensuing long-run increase, it follows that:

In the long run, changes in the money supply:

Use the following to answer questions: Figure: Changes in the Money Supply -(Figure: Changes in the Money Supply) Look at the figure Changes in the Money Supply. Federal Reserve policy to increase the supply of money, hence to lower the interest rate from 6% to 4%, is accomplished by action that _____ the _____ Treasury bills.

Consider an economy that is facing a recessionary gap. The Federal Reserve decides to use expansionary monetary policy to close that gap. As a result of this policy, in the short run the money supply will _____, the interest rate will _____, investment and consumption spending will _____, and real GDP will _____.

Use the following to answer questions: Figure: Short-Run Determination of the Interest Rate -(Figure: Short-Run Determination of the Interest Rate) Look at the figure Short-Run Determination of the Interest Rate. If the money supply is at MS₂ and the Fed conducts contractionary monetary policy, in the short run the interest rate increases to r₁. In the long run prices will _____ the demand for money.

Contractionary monetary policy:

If the economy is at potential output and the Fed decreases the money supply so that actual output is less than potential output, eventually nominal wages will_____ and short-run aggregate supply will _____.

In the income-expenditure model, expansionary monetary policy leads to _____ interest rates, a(n) _____ in planned investment spending, and a(n) _____ in equilibrium GDP.

Use the following to answer questions: Figure: A Money Market -(Figure: A Money Market) Look at the figure A Money Market. Holding the money supply constant, which of the following might cause the equilibrium interest rate to decrease to r₁?

In the long run, the only effect of monetary policy is on:

One advantage of inflation targeting over the Taylor rule is that with inflation targeting, because the public knows the target in advance, uncertainty is reduced.