Exam 15: Monetary Policy

Inflation targeting has been adopted by the central banks of several countries including the European Central Bank.

The smaller the fraction of an investment financed by borrowing,

A decrease in real GDP can

Between September 2007 and March 2008 there was a substantial reduction in the demand for housing.What action did the Fed take in response to the reduction in the demand for housing?

The Fed's preferred measure of inflation is

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

Expansionary monetary policy refers to the Fed's increasing the money supply and increasing interest rates to increase real GDP.

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

Figure 15-15 -Refer to Figure 15-15.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?

When housing prices fell as they did beginning in 2006 following the housing market bubble,most banks and other lenders ________ the requirement for borrowers,making it ________ for potential home buyers to obtain mortgages.

Would the Federal Reserve respond more aggressively with interest rate cuts in a recession caused by a decrease in spending,as in the 2001 recession,than in a recession caused by an increase in oil prices,as in the 1974-75 recession?

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?

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

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

Under the monetary growth rule proposed by the monetarists,the money supply would grow each year at a constant rate equal to the long-run rate of growth of

Since World War II,the Federal Reserve has not been involved in carrying out monetary policy.

Lowering the interest rate will

An increase in the price level causes

For purposes of monetary policy,the Federal Reserve has targeted the interest rate known as the

If the Fed orders an expansionary 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