Exam 17: Monetary Policy and Inflation

Recall the Application about the possible link between the value of the U.S. dollar and the worldwide increase in commodity prices to answer the following question(s). Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom. -Recall the Application. The rise in commodity prices corresponded with ________ in interest rates, and this change in interest rates would result in bond prices ________.

Explain the three different types of money demand.

Recall the Application about the Fed's policy of quantitative easing to answer the following question(s). -Recall the Application. The Fed's goal of this policy was to ________ the prices of government bonds and mortgage securities and ________ the interest rates on both bonds and mortgages.

When the Fed increases the money supply, it leads to lower interest rates.

The exchange rate is

An open market ________ by the Fed decreases the money supply, which leads to ________ interest rates and a fall in investment spending.

If the monthly unemployment rate increase mentioned in the Application wound up being a permanent and not temporary change, the best economic decision by the committee would most likely be to

An open market sale by the Fed

Explain what happens to the money supply, interest rates, investment spending and GDP when the Fed makes open market bond purchases.

The one organization that has the power to change the total amount of reserves in the banking system is the

If the Federal Reserve conducts an open market sale, the

The Fed has immense power and there are no limits to the extent to which it can effectively control the economy.

An increase in the level of real GDP in the economy leads to

The depreciation of the dollar will make U.S. goods ________ to foreigners and make imports ________ for U.S. residents.

When the Federal Reserve buys bonds on the open market, it decreases the money supply.

The Fed has recently paid interest on the required and excess reserves that banks hold.

How would the Fed's sale of government bonds on the open market affect the money supply?

What three factors affect the demand for money?

Recall the Application about the possible link between the value of the U.S. dollar and the worldwide increase in commodity prices to answer the following question(s). Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom. -According to this Application, Janet L. Yellen, the Vice-Chair of the Board of Governors, believes that ________ in worldwide demand and ________ of supply were the primary cause of the worldwide increase in commodity prices.

Increased investment spending in the economy would be a possible result of