Exam 11: Monetary Policy and the Fed

Use the following to answer questions . Exhibit: Effects of Monetary Policy -(Exhibit: Effects of Monetary Policy) If the Fed acts to close the output gap in Panel (a), it would

In the short-run velocity is not constant. Which of the following variables can be affected by a change in money supply? I. real GDP II. nominal GDP III. the price level

The impact lag is the time between putting a policy in place and when its effects are felt in the economy.

When the Fed lowers the target rate of interest for federal funds, it

Use the following to answer questions . Exhibit: Monetary Policy 1 -(Exhibit: Monetary Policy 1) By shifting the demand curve from D₁ to D₂, the Fed is exercising

If people wished to hold a quantity of money equal to 80% of nominal GDP, the velocity of money would be

Suppose at present people hold a quantity of money equal to 85% of nominal GDP. What happens to velocity if people wish to increase their money holdings to 80% of nominal GDP?

The equation of exchange determines the supply of money in the economy.

On October 12, 1987, the Dow Jones Industrial Average plunged 508 points, wiping out more than $500 billion in a few hours. How did the Fed respond to this drastic fall in the stock market index?

Possible targets for monetary policy include all of the following except

Use the following to answer questions . Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply -(Exhibit: Monetary Policy and Long-Run Aggregate Demand and Aggregate Supply) If the economy is at point c,

The velocity of money is

Contractionary monetary policy, achieved by selling bonds in the open market, tends to discourage investment.

All other things unchanged, the velocity of money will

Mary Chestnut reported in her diary that, during the Civil War, she became much less willing to hold "'Confederates," currency issued by the Confederate State of America. Assuming that this change in preferences was widespread in the South, it suggests

The congressional act passed in 1978 that established specific numerical goals for the unemployment rate and the inflation rate to be achieved by 1983 was the

The recognition lag is the length of time it takes between recognizing a problem and adopting a policy to address that problem.

If the economy experiences an inflationary gap, a contractionary monetary policy will

If nominal GDP = $900 billion and the public holds $300 billion in M2, then the velocity of the M2 money supply is

When the Fed buys bonds in the open market, we can expect