Exam 11: Monetary Policy and the Fed

In an economy experiencing hyperinflation, we expect to observe

Which of the following statements is true if interest rates were zero?

Use the following to answer questions . Exhibit: The Bond Market -(Exhibit: The Bond Market) Suppose the Fed takes action that shifts the demand curve from S to S′, as illustrated in Panel (b). As a result, the interest rate

Use the following to answer questions . Exhibit: The Bond Market -(Exhibit: The Bond Market) If the Fed wants to achieve the results shown in Panel (b), it should

Use the following to answer questions . Exhibit: Monetary Policy and Rational Expectations -(Exhibit: Monetary Policy and Rational Expectations) Suppose the economy is operating at point a and that individuals have rational expectations. They calculate that expansionary monetary policy

If you earn and spend $2,000 per month and maintain an average cash balance of $500 per month, your velocity of money is

According to the text, in many respects, the single most powerful economic policymaker in the United States is

If the velocity of money is constant, then nominal GDP can change only if there is a change in the money supply.

If you earn and spend $300 per week and maintain an average cash balance of $100 per week, your velocity of money is

Using the equation of exchange, if the nominal GDP is $8,000 billion and the money supply is $1,600 billion, then

When the Fed raises the target for federal funds, it

Use the following to answer questions . Exhibit: Effects of Monetary Policy -(Exhibit: Effects of Monetary Policy) The shift in the demand for bonds from D₁ to D₂, in Panel (b) will result in a

During an economic slump, policies that lower interest rates may not actually boost investment because

Following the U.S. financial crisis in 2008, some observers assert that the policies of Fed Chairman Greenspan contributed to the crisis. Which of the following is a criticism of Greenspan's policies? I. The very low interest rates used to fight the 2001 recession were maintained for too long, leading to the real estate bubble. II. The Fed provided real estate developers with liquidity to encourage property development and offered tax breaks to first-time home buyers, which in turn fueled the real estate bubble. III. The Fed did not promote appropriate regulations to deal with the new financial instruments that were created in the early 2000s.

Use the following to answer questions . Exhibit: The Bond Market -(Exhibit: The Bond Market) If the Fed wants to achieve the results shown in Panel (a), it should

A liquidity trap is said to exist when a change in monetary policy has no effect on

Changing the required reserve ratio is an often-used monetary tool to influence the federal funds rate.

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 b, the Federal Reserve can close the output gap by selling bonds. In the bond market,

Use the following to answer questions . Exhibit: Monetary Policy and Rational Expectations -(Exhibit: Monetary Policy and Rational Expectations) If rational expectations exist and the economy is initially operating at point d. If the Fed undertakes contractionary monetary policy the economy will

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