ch 15 econ study

the money supply curve will shift to the left and the equilibrium interest rates will rise.

If the FOMC orders the trading desk to sell Treasury securities

contractionary monetary policy

If the Fed decreases the money supply and increases interest rates in order to reduce inflation, it is engaging in __________.

an open market sale.

If the Federal Reserve wishes to decrease the money supply to slow the economy, it will conduct:

keep the money supply growing at a constant rate.

If the economy moves into a recession, monetarists argue that the Fed should

the money demand curve shifts to the right

If the price level increases, __________.

it is difficult to time monetary policy because of the impact lags.

One of the criticisms of the Fed's active intervention to stabilize the economy is that:

price level stability

One of the primary goals of the Federal Reserve is __________.

An open market purchase leads to an increase in the money supply which causes interest rates to fall and investment spending to rise.

Which of these statements best describes the scenario shown in these graphs?

An increase in real GDP

Which of these will shift the money demand curve to the right?

To reduce real GDP in order to reduce inflation, which occurs if real GDP is above potential GDP.

Why would the Fed intentionally use contractionary monetary policy to reduce real GDP?

government purchases.

All of these will most likely increase as a result of expansionary monetary policy except:

more, rise

As interest rates decline, stocks become a __________ attractive investment relative to bonds, and this causes the demand for stocks and their prices to __________.

difficulties, should not

Because of the __________ in forecasting the economy, many economists believe the Fed __________ take a very active role in trying to stabilize the economy.

The FOMC reduced the target for the fed funds rate steadily in 2008.

How did the FOMC react to the recession of 2007-2009?

the money demand curve shifts to the right

If real GDP increases:

buy U.S. Treasury securities.

If the FOMC decides to increase the money supply, it orders the trading desk at the Federal Reserve Bank of New York to

a monetary growth rule.

Monetarism is a school of economic thought that favors:

It links the Fed's target for the federal funds rate to economic variables.

The Taylor rule for federal funds rate targeting does which of these things

at which banks lend to each other.

The federal funds rate is the rate:

low, high

When interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is __________ , so the quantity of money demanded will be __________.

When interest rates are high

When is the opportunity cost of holding money higher?

there is movement down a stationary money demand curve

When the interest rate decreases, __________.

Falling housing prices

Which of these factors were primary cause of the recession of 2007-2009?

The graph on the right

Which of these graphs depicts the impact of a decrease in the aggregate price level?

Home ownership

Which of these is not one of the four main goals of monetary policy