Exam 3: The Fed and Interest Rates

Decreasing interest rates increase financial wealth and encourage consumer spending.

A decrease in reserve requirements could lead to a(n)

Monetary policies directed toward increased economic growth may have what impact upon the value of the dollar in relation to other currencies?

A significant move by the Fed toward a "tight" money policy is likely to enhance exports.

Deposits tend to expand whenever:

Monetarists believe that an increase in the money supply, all else equal, will cause:

Which of the following would most likely decrease the Federal Funds rate?

Restrictive monetary policy first impacts the market, security prices and interest rates.

Generally, plant and equipment investment spending will decrease if

The goals of U.S. monetary policy were set by Congress.

A decrease in reserve requirements will definitely cause

How does the Federal Reserve control the money supply by controlling the size of the monetary base? Note the tools of monetary policy and how each can affect the monetary base and money supply.

Cash drains decrease the monetary base, but not the money supply.

Housing investment is sensitive to changes in interest rates.

Transaction deposits, such as DDAs, expand when the Fed sells securities.

The expected effect of quantitative easing (QE) in 2010 and 2011 is to lower long-term interest rates to boost the economy.

Monetary policy probably affects all of the following except

Changes in spending caused by changing security values are called the

Unemployment should fall if

Interest rates and the money supply tend to vary inversely, at least in the short term.