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Exam 17: Monetary Policy

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Question 31

Multiple Choice

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In the short run, if the Fed wants to raise the federal funds rate, it

A) instructs large commercial banks to sell government securities in the open market.
B) instructs the New York Fed to sell government securities in the foreign exchange market.
C) tells large commercial banks to raise their interest rates.
D) instructs the New York Fed to buy government securities in the open market.
E) instructs the New York Fed to sell government securities in the open market.

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Question 32

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Control of monetary policy rests with

A) Congress.
B) the Federal Reserve.
C) the Comptroller of the Currency.
D) the U.S. Treasury.
E) the President.

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Question 33

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The monetary policy instrument the Federal Reserve choose to use is the

If the Fed raises the federal funds rate, eventually the

The rightward shift of the RS curve will lead to a_{--------------------} in the real interest rate,_{--------------------} in investment, and_{--------------------} in aggregate demand.

When the Fed_{--------------------}_, the U.S. foreign exchange rate falls.

An instrument rule is based on _{--------------------}of the economy while a targeting rule is based on_{--------------------} of the economy.

The interest rate banks charge each other on loans of reserves is called the

A hike in the federal funds rate results in_{--------------------} in the real interest rate which leads to a_{--------------------} in investment.

If real GDP exceeds potential GDP, to move the economy to potential GDP the Fed

Which of the following is a monetary policy goal? I. keeping the inflation rate low Ii. attaining maximum employment Iii. keeping the long-term interest rate at a moderate level

Which of the following is the Fed's monetary policy instrument?

- The economy is at the equilibrium shown as point a in the above figure. To restore the economy to potential GDP, the Fed should

The Fed raises the interest rate when it

Currently the Fed targets

Consumer confidence in the economy falls, and as a result, aggregate demand decreases. As real GDP falls below potential GDP, if the Fed followed Friedman's k-percent rule, the Fed would

The Federal Reserve monetary policy goals of maximum employment means

Which of the following is NOT an effect from a change in the federal funds rate?

The core inflation rate measures changes in the

When the Fed raises the federal funds rate, the exchange rate_{--------------------}and net exports_{--------------------}