Exam 26: Monetary Policy

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.

In the Taylor rule,does the target for the federal funds rate respond differently for a recession caused by a decrease in aggregate demand and for a recession caused by a decrease in short-run aggregate supply? Explain whether there is or is not a difference in how the target for the federal funds rate changes.

The economy suffered a mild recession in 2001.Despite the recession,home sales and durable goods sales remained high.Which of the following is a plausible explanation?

In reality,the Fed is unable to use monetary policy to keep real GDP exactly at its potential level.

Which of the following correctly describes what the Fed used as monetary targets in the past?

When the Federal Reserve increases the money supply,at the previous equilibrium interest rate households and firms will now have

The argument advanced by Milton Friedman for adopting a monetary growth rule is that

Your income will increase if the Federal Reserve buys a Treasury bill from you and pays you with a check from the Fed.

Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP.Explain what happens to aggregate demand,real GDP,and the price level.

The interest rate that banks charge other banks for overnight loans is the

If the Fed orders a contractionary monetary policy,describe what will happen to the following variables relative to what would have happened without the policy: a.The money supply b.Interest rates c.Investment d.Consumption e.Net Exports f.The aggregate demand curve g.Real GDP h.The price level

Prior to 1970,mortgages were ________ resold in the secondary market.

In October 2008,Congress passed the Troubled Asset Relief Program (TARP),under which the Treasury provided ________ to banks in exchange for ________.

Suppose the Fed increases the money supply.Which of the following is true?

Figure 26-7 -Refer to Figure 26-7.Suppose the economy is in a recession and no policy is pursued.Using the static AD-AS model in the figure above,this situation would be depicted as a movement from