Exam 29: Monetary Policy: Conventional and Unconventional

Open-market operations are easy for the Federal Reserve to conduct and are therefore the tool of monetary policy that the Federal Reserve uses most often.

Assume the required reserve ratio is 10 percent and the FOMC orders an open-market sale of $50 million in government securities from member banks.If the oversimplified money multiplier is assumed, then the money supply will

Who is considered to be the most powerful person in the economic world by many observers?

Most power in the Federal Reserve System is held by the

The Federal Reserve Bank was modeled after the European Central Bank.

Money supply is to income as

Figure 29-1 ​ -In Figure 29-1, which panel shows the effect of an expansionary monetary policy on the interest rate?

Why does the Fed have imperfect control over the money supply?

Interest rate (on any bond) is equal to

How does a central bank influence the lending capacity of the banks?

The Fed's founders viewed the Fed as a means of maintaining the money supply during economic contractions and as a lender of last resort.

Assume that the banking system has $200 billion in reserves.There are no excess reserves in the system.If the reserve requirement is decreased from 10 percent to 8 percent, what will happen to the level of excess reserves in the system?

An increase in the money supply should cause the expenditure schedule to shift upward.

The tool most frequently relied on by the Fed is

If interest rates increase, what will happen to the demand for reserves?

Technically, the Federal Reserve district banks are corporations whose stockholders are the

Investment spending is sensitive to interest rates.

The money supply contracts when the Fed

As a knowledgeable investor in 2007, you should have realized that as interest rates fell, bond prices would

Banks will hold additional excess reserves when