Exam 26: Monetary Policy

Table 26-3 Year Potential Real GDP Real GDP Price Level 2016 \ 18.0 trillion \ 18.0 trillion 150 2017 18.5 trillion 18.8 trillion 154 -Refer to Table 26-3.Consider the hypothetical information in the table above for potential real GDP,real GDP,and the price level in 2016 and in 2017 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 2017,which of the following will be lower than if the Fed had taken no action?

If the Fed buys Treasury bills,this will shift the

Ceteris paribus,an increase in the money supply will lower short-term interest rates.

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

What is a mortgage? What were the important developments in the mortgage market during the years after 1970?

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

Figure 26-15 -Refer to Figure 26-15.In the figure above,suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could the Federal Reserve use to move the economy to point C?

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?

The Federal Reserve System's four monetary policy goals are

Table 26-2 Year Potential Real GDP Real GDP Price Level 2016 \ 18.0 trillion \ 18.0 trillion 150 2017 18.5 trillion 18.2 trillion 152 -Refer to Table 26-2.Consider the hypothetical information in the table above for potential real GDP,real GDP,and the price level in 2016 and in 2017 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 2017,which of the following will be higher than if the Fed had taken no action?

The Federal Reserve can directly affect its monetary policy ________,which then affect its monetary policy ________.

An increase in interest rates

Figure 26-1 -Refer to Figure 26-1.In the figure,the money demand curve would move from Money demand1 to Money demand2 if

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

Expansionary monetary policy enacted during a recession will cause the inflation rate to increase.

In November 2008,the Fed began its first round of quantitative easing.In total,the Fed conducted ________ rounds of quantitative easing before ending the program in October 2014.

Suppose the equilibrium real federal funds rate is 5 percent,the target rate of inflation is 3 percent,the current inflation rate is 5 percent,and real GDP is 4 percent above potential real GDP.If the weights for the inflation gap and the output gap are both 1/2,then according to the Taylor rule the federal funds target rate equals

Suppose the equilibrium real federal funds rate is 3 percent,the target rate of inflation is 3 percent,the current inflation rate is 1 percent,and real GDP is 8 percent below potential real GDP.If the weights for the inflation gap and the output gap are both 1/2,then according to the Taylor rule the federal funds target rate equals

In the following table,fill in the columns for your return on investment if the price of your house increased or decreased by 40 percent,based on the down payments specified in the first column. Return on Your Investment From Dawn Payment A 40 Percent Increase in the Price of Your Hause A 40 Percent Decrease in the Price of Your House 100\% 20 10 5

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