Exam 27: Monetary Policy and Interest Rates

When an economy has too much inflation, then the Federal Reserve will _____ the target interest rate in order to _____ aggregate demand.

Econia experiences a period when home prices rise rapidly, investors note these rising prices and keep buying homes, and therefore prices are pushed even higher. Econia's housing marketing is experiencing:

High interest rates could exist due to either a _____ money supply or _____ inflationary expectations.

The Federal Reserve's mandate to achieve maximum employment means that the Fed is trying to achieve:

An economy is in a liquidity trap when:

A policy transmission mechanism is:

What challenge do monetary policymakers face when they try to move an economy out of a liquidity trap?

What impact do tight money and easy money policies have on short-run interest rates?

Alternate transmission mechanisms for expansionary monetary policy do NOT include the idea that monetary expansion can:

As a result of the Great Depression, economists were more concerned about _____ than _____ for decades.

The school of thought in economics that focuses on the role that the money supply plays in determining nominal GDP and inflation is called:

Which of the following economists developed a theory during the Great Depression that dominated macroeconomic policy approaches for the next fifty years?

The Federal Reserve is able to achieve its dual mandate because monetary policy affects:

When interest rates are high due to a reduction in saving, business firms are likely to:

"One cannot judge whether money is easy or tight by looking at interest rates." Why is this statement true?

A decrease in the money supply is referred to as _____ money policy.

Which of the following is NOT a difference between quantitative easing (QE) and ordinary expansionary monetary policy?

If an expansionary monetary policy raises expectations for inflation, then interest rates:

An economy in a liquidity trap faces a zero lower bound on short-term interest rates. Some believe that expansionary monetary policy would be ineffective in this situation. Others argue that there are alternative transmission mechanisms that allow policy to have some impact. Briefly describe at least four alternative transmission mechanisms for monetary policy.

When the Federal Reserve sets an interest rate goal, it typically focuses on having the _____ rate reach that goal.