Money Creation & Monetary Policy

In the short​ run, the Federal Reserve faces a tradeoff between A. interest rates and unemployment. B. inflation and real GDP. C. economic growth and employment. D. inflation and price stability.

inflation and real GDP.

Price level stability A. is the most important tool of the Federal Reserve. B. has no relationship to growth in potential GDP. C. is thought by most economists to be reached with a measured inflation rate of between 0 and 2 percent a year. D. was attained by the Fed for the period between 1979 and 2001.

is thought by most economists to be reached with a measured inflation rate of between 0 and 2 percent a year.

Which of the following is one of the​ Fed's policy​ goals? A. price level stability B. monetary base C. exchange rate D. help the President win reelection

price level stability

Which of the following are NOT Federal Reserve monetary policy​ goals? A. price level stability B. moderate​ long-term interest rates C. maximum employment D. zero percent unemployment.

zero percent unemployment.

The Federal Open Market Committee meets​ ________ times per year. A. 52 B. 26 C. 2 D. 8

8

Read the following statements and determine if they are true or false. I. The Federal​ Reserve's monetary policy must be approved by the President of the United States . II. The Federal Reserve Board of Governors meets approximately every six months to review the state of the economy and determine monetary policy. A. I is false and II is true. B. I and II are both true. C. I and II are both false. D. I is true and II is false.

I and II are both false.

When the output gap is​ positive, it represents​ ________ gap, and when it is​ negative, it represents​ ________ gap. A. an​ employment;an unemployment B. a​ recessionary; an inflationary C. an​ inflationary;a recessionary D. an​ inflationary; an employment

an​ inflationary;a recessionary

The monetary policy instrument the Federal Reserve choose to use is the A. quantity of money. B. federal funds rate. C. exchange rate. D. required reserves rate.

federal funds rate.

The higher the federal funds​ rate, the​ ________ the opportunity cost of holding​ reserves, which​ ________ the incentive to economize on reserves. A. higher; increases B. lower; decreases C. lower; increases D. higher; decreases

higher; increases

​Long-term interest rates are​ ________ than​ short-term because​ long-term loans are​ ________ than​ short-term loans. A. lower; safer B. higher; safer C. higher; riskier D. lower; riskier

higher; riskier