Exam 26: Monetary Policy and the Fed

Figure 11-1 -Refer to Figure 11-1.Suppose the Fed takes action that shifts the demand curve from D to D′, as illustrated in Panel (a).What happens to the interest rate?

What is velocity of money?

The Case in Point titled "Velocity and the Confederacy" suggests that during the Civil War, the South faced

The delay between the time a policy is enacted and the time the policy has its effect on the economy is called

Which of the following are monetary policy goals? I.maintain high interest rates II.keep unemployment rates low III.reduce the size of the banking sector IV.prevent high rates of inflation

At the end of 2008, the federal funds rate in the United States was close to zero.Which of the Following is a major concern associated with such a low rate?

If the demand curve for money were horizontal at some interest rate, an increase in the money supply

Figure 11-6 -Refer to Figure 11-6.Suppose the economy is operating at "a".Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at _______.They rationally adjust their behavior, bypassing ________.

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

All other thing unchanged, when the Fed sells government bonds, it aims to shift the aggregate demand curve to the right.

Figure 11-2 -Refer to Figure 11-2.By shifting the demand curve from D₁ to D₂, the Fed is attempting to _______ the economy by _______ interest rates.

The shortest of the three lags for monetary policy is

Suppose money supply (M)= $3,960 billion, price level (P)= 1.1, and real GDP (Y)= $7,200 billion.Calculate the value of velocity using the equation of exchange.

Suppose the Fed's primary goal is price stability and it aims to keep the inflation rate at 2%.If the inflation rate rose above 2%, what should it do?

Using the quantity equation, the demand for money can be expressed as

If velocity is constant, which of the following results flow from the quantity equation?

When the Fed buys bonds in the open market, it pursues an expansionary monetary policy.

Which of the following is an interest rate that the Fed has targeted in the last several years?

Figure 11-5 -Refer to Figure 11-5.If the economy is at point c, an open market purchase would cause

Figure 11-5 -Refer to Figure 11-5.Short-run but not long-run equilibrium positions occur at points