Exam 17: Monetary Policy

Under a k-percent rule, if the economy goes into a expansion, the Fed would

When the Fed raises the federal funds rate, eventually there is

If the Fed raises the federal funds rate, eventually the

Which of the following are TRUE regarding Milton Friedman's k-percent money targeting rule? i. Currently this policy is used by many policy makers. ii. This rule sets the growth rate of the quantity of money independently of the economy's behavior. iii. For this policy to work well, the velocity of circulation must be stable.

Control of monetary policy rests with

The federal funds rate is ________ of the Fed.

If the Fed wants to fight inflation, it will ________ the federal funds rate in order to ________.

Because investment, consumption expenditure, and net exports are interest-sensitive components of expenditure, a ________ in the federal funds rate brings ________ in ________.

Price level (GDP deflator, ) Aggregate supply (billions of 2005 dollars) Aggregate demand (billions of 2005 dollars) 30 28 16 25 25 19 20 22 22 15 19 25 10 16 28 -Using the data in the above table, if potential GDP for this economy is $25 billion, then in order to restore full employment, the federal funds rate can be

-The figure above shows the market for bank reserves in Futureland.If the Bank of Futureland lowers the target federal funds rate by 1 percentage point, the central bank will conduct an open market ________ of government securities of ________ to ________ the supply of reserves.

The Fed raises the federal funds rate.Which of the following changes occurs most rapidly?

In the short run, lowering the federal funds rate shifts the aggregate demand curve ________ so that real GDP ________ and the price level ________.

To fight a recession, the Fed can

A change in the federal funds rate ________ the supply of loanable funds, ________ the long-term real interest rate, and ________ investment.

When the Fed ________, the U.S.foreign exchange rate falls.

The main goals of monetary policy include all of the following EXCEPT

A decrease in the federal funds rate

When the Fed fears inflation, the Fed ________ government securities, so that the federal funds rate ________ and the quantity of money ________.

When the Fed sells government securities, banks' reserves ________, the quantity of money ________, and the federal funds rate ________.

If the Fed follows the Taylor rule and the economy goes into a recession, the Fed would