Exam 19: The Conduct of Monetary Policy: Strategy and Tactics

The Fed was committed to keeping interest rates low to assist Treasury financing of budget deficits

Fluctuations in the demand for reserves cause the Fed to lose control over a monetary aggregate if the Fed targets

The strengthening of the dollar between 1980 and 1985 contributed to a ________ in American competitiveness, putting pressure on the Fed to pursue a more ________ monetary policy.

Explain what inflation targeting is. What are the advantages and disadvantages of this type of monetary policy strategy?

The mandate for the monetary policy goals that has been given to the Federal Reserve System is an example of a ________ mandate.

The decision by inflation targeters to choose inflation targets ________ zero reflects the concern of monetary policymakers that particularly ________ inflation can have substantial negative effects on real economic activity.

The Fed's mistakes of the early 1930s were compounded by its decision to

If the Taylor Principle is not followed and nominal interest rates are increased by less than the increase in the inflation rate, then real interest rates will ________ and monetary policy will be too ________.

According to the Taylor rule, the Fed should raise the federal funds interest rate when inflation ________ the Fed's inflation target or when real GDP ________ the Fed's output target.

Foreign exchange rate stability is important because a decline in the value of the domestic currency will ________ the inflation rate, and an increase in the value of the domestic currency makes domestic industries ________ competitive with competing foreign industries.

Although the Fed professed employment of a monetary aggregate targeting strategy during the 1970s, its behavior suggests that it emphasized

When it comes to choosing an policy instrument, both the ________ rate and ________ aggregates are measured accurately and are available daily with almost no delay.

Although the Fed professed employment of ________ targeting during the 1970s, its behavior suggests that it emphasized ________ targeting.

During World War II, the Fed in effect relinquished its control of monetary policy through its policy of

Unemployment resulting from a mismatch of workers' skills and job requirements is called

The mandate for the monetary policy goals that has been given to the European Central Bank is an example of a ________ mandate.

Explain and demonstrate graphically how targeting nonborrowed reserves can result in federal funds rate instability.

A credit-driven bubble arises when ________ in lending causes ________ in asset prices which can cause ________ in lending.

Due to the lack of timely data for the price level and economic growth, the Fed's strategy

The type of monetary policy that is used in Canada, New Zealand, and the United Kingdom is