Exam 26: Monetary Policy and the Fed

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

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

Figure 11-5 -Refer to Figure 11-5.If the economy is at point c, the Federal Reserve can close the output gap by buying bonds.In the bond market,

Figure 11-3 -Refer to Figure 11-3.By shifting the supply curve from S₁ to S₂, the Fed is attempting to ____ the economy by _______ interest rates.

The lag between the time at which a policy is put in place and the time that policy affects the economy is called

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

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).As a result, the interest rate ______ and investment _____.

The monetary policy tool that involves the buying and selling of government bonds is

Figure 11-1 -Refer to Figure 11-1.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 ______ and investment ______.

Assume that velocity is constant in the long run.Which of the following equations correctly describes the quantity equation in terms of percentage rate of change? ? ?means "change in."

The time it takes for the Fed or government policymakers to enact policies to correct unemployment or inflation problems is a source of which lag?

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?

Suppose the economy experiences a recessionary gap.Expansionary monetary policy will _______ interest rates and _______ exchange rates.

What are the three types of monetary policy lags?

All other things unchanged, the velocity of money will _______ if the quantity of money demanded _______.

Figure 11-5 -Refer to Figure 11-5.If the economy is at point b,

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

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

Figure 11-6 -Refer to Figure 11-6.If rational expectations exist and the economy is initially operating at "d".If the Fed undertakes contractionary monetary policy the economy will

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