Econ quiz 13

In counteracting demand shocks, the Fed can achieve

Both full employment and price stability

If the unemployment rate is 10% and the inflation rate is 2%, the Fed will most likely

Buy bonds

Suppose short run aggregate supply shifts to the left because of a decrease in the supply steel. The federal Reserve fights the resulting recession with expansionary monetary policy. This will...

Cause inflation

Fed chairman Ben Bernanke was not happy about bailing out institutions that had gotten themselves in trouble by taking on too much risk why did the FED do it?

The Fed feared that failures of very large institutions threatened the stability of the entire financial system

An increase in the interest rate cause the aggregate _____________ curve to shift _______

demand; leftward

Monetarists believe that in the short run a change in the money supply can affect ____________, while in the long run, a change in the money supply will affect _______________

output and the price level; the price only

Monetary targeting is setting a steady growth rate in

the money supply

Transparency in the federal reserve policy

is a relatively recent phenomenon that tends to mitigate uncertainty in financial markets and leads to more effective monetary policy

If the economy is facing inflationary pressures, the Fed will

raise interest rates

Which action is the Fed most likely to take to curb inflation

sell bonds in the open market