Exam 15: Monetary Policy

If money demand is extremely sensitive to changes in the interest rate,the money demand curve becomes almost horizontal.If the Fed expands the money supply under these circumstances,then the interest rate will

The Taylor rule helps explain the relationship between the Fed's ________ and ________.

When housing prices ________ as they did beginning in 2006 following the housing market bubble,most banks and other lenders tightened the requirement for borrowers,making it ________ for potential home buyers to obtain mortgages.

In 2008,the Treasury and Federal Reserve took several actions in response to the deepening financial crisis.One action was the creation of the Term Securities Lending Facility,under which the Fed will loan up to $200 billion of treasury securities in exchange for

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

An argument in favor of the Federal Reserve adopting inflation targeting is that in the long run,the Fed can have an impact on inflation but not on real GDP.

Lowering the interest rate will

Which of the following correctly describes what the Fed used as monetary targets in the past?

The money demand curve,against possible levels of interest rates,has a

When the Fed decided to buy long-term Treasury securities while selling an equal amount of shorter-term treasury securities to keep long-term interest rates low,it was following a strategy known as

The smaller the fraction of an investment financed by borrowing,

Monetary policy is conducted by the U.S.Treasury Department.

Inflation targeting has been adopted by the central banks of several countries including the European Central Bank.

The rate of interest banks charge other banks for overnight loans of reserves is the

A monetary growth rule means that

Figure 26-5 -Refer to Figure 26-5.In the figure above,if the economy is at point A,the appropriate monetary policy by the Federal Reserve would be to

If the Fed raises its target for the federal fund rate,this indicates that

The leader of the monetarist school and major proponent of a monetary growth rule was

Figure 26-6 -Refer to Figure 26-6.In the figure above suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?

The Federal Reserve could target both the money supply and the interest rate at the same time if it controlled money demand along with money supply.