Exam 26: Monetary Policy

In the countries that have adopted inflation targeting,the inflation rate has typically

The Federal Reserve's performance in the mid-to-late 1980s,1990s,and early 2000s has received high marks from economists,even without inflation targeting.

In 2008,the Treasury and Federal Reserve took action to save large financial firms such as Bear Stearns and AIG from failing.Which of the following is one reason why these measures were taken?

If money demand is extremely sensitive to changes in the interest rate,the money demand curve becomes almost horizontal.If the Fed expands the money supply under these circumstances,then the interest rate will

An increase in the price level causes

Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP.

When Congress established the Federal Reserve in 1913,what was its main responsibility? When did Congress broaden the Fed's responsibilities?

The larger the fraction of an investment financed by borrowing

Although the Federal Reserve had traditionally made discount loans only to commercial banks,in response to the financial crisis in 2008 the Fed made ________ eligible for discount loans as well.

Suppose the Fed decreases the money supply.In response households and firms will ________ short term assets and this will drive ________ interest rates.

When calculating GDP,the Bureau of Economic Analysis releases its "advanced estimate" of a quarter's GDP approximately

Buying a house during a recession may be a good idea if your job seems secure because the Federal Reserve often lowers interest rates during a recession.

A financial asset is considered a security if

Suppose that the Federal Reserve Open Market Committee adheres to the ideas expressed by ________.If the economy moves into a recession,the Fed would recommend that the federal funds target rate decrease as long as the inflation rate did not rise above the publicly announced goal for inflation.

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

Table 26-6 Year Potential Real GDP Real GDP Price Level 2016 \ 18.1 trillion \ 18.1 trillion 150 2017 18.4 trillion 18.6 trillion 155 -Refer to Table 26-6.Suppose the table above 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 2017,should the Fed use a contractionary or expansionary policy? Should it raise or lower its interest rate target? How should it conduct open market operations to achieve its goal?

Figure 26-7 -Refer to Figure 26-7.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

If the Federal Reserve raises or lowers interest rates too late,it could result in a ________ policy that destabilizes the economy.

The Fed can use expansionary monetary policy to lower interest rates to stimulate aggregate demand.

The supporters of a monetary growth rule believe that active monetary policy