Exam 16: Monetary Theory and Policy

While monetary targets are important, also significant is what Fed officials have to say. Sometimes reassurance is all that's required to calm market jitters.

If the Fed targets the interest rate, then

If the Fed decreases the money supply,

If the price level rises, the money demand curve will shift to the right.

An increase in aggregate demand will have the greatest short-run effect on real output if the

As the price level rises, money __________ causing interest rates to __________ and investment spending to __________.

The equilibrium interest rate is determined by

In deciding how much money to hold, you should compare the

There is considerable disagreement about whether the Fed should

Which monetary policy would be appropriate to close a contractionary gap?

The quantity theory of money states that increases in the money supply result in proportional increases in real GDP.

Which of the following is an example of an expansionary monetary policy?

Exhibit 16-5 -If the economy pictured in Exhibit 16-5 is in equilibrium where AD = SRAS, then it

When the money supply increases, people get rid of their excess money by buying real assets, such as durable goods.

In the United States over the last decade, the velocity of

In an economy in which velocity is constant and real output grows at an average rate of 4 percent per year, a 4 percent average rate of growth in the money supply would result in

An increase in the money supply will cause a decrease in planned investment spending.

If the Fed increases the money supply, then

The money demand curve describes how the quantity of money demanded varies with

Which of the following, other things constant, will shift the money demand curve to the right?