Econ test 4

Expansionary monetary policy refers to the​ ________ to increase real GDP.

federal reserve's increasing the money supply and decreasing interest rates

Monetary policy refers to the actions the

Federal Reserve takes to manage the money supply and interest rates to pursue its economic objectives.

Contractionary monetary policy on the part of the Fed results in

a decrease in the money​ supply, an increase in interest​ rates, and a decrease in GDP.

Using the money demand and money supply​ model, an open market purchase of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to

decrease

The interest rate that banks charge other banks for overnight loans is the

federal funds rate

The goals of monetary policy tend to be interrelated. For​ example, when the Fed pursues the goal of​ __________, it also can achieve the goal of​ ________________ simultaneously.

high employment; economic growth

Using the money demand and money supply​ model, an increase in money demand would cause the equilibrium interest rate to

increase

An increase in the interest rate

increases the opportunity cost of holding money

if the economy is at point A​, the appropriate monetary policy by the Federal Reserve would be to

lower interest rates

An increase in real GDP can shift

money demand to the right and increase the equilibrium interest rate.

The money demand curve has a

negative slope because an increase in the interest rate decreases the quantity of money demanded

The Federal​ Reserve's four goals of monetary policy are

price stability, high employment, economic growth, and stability of financial markets and institutions

To reassure investors who were unwilling to buy mortgages in the secondary​ market, the U.S. Congress used two government sponsored​ enterprises, Fannie Mae and Freddie​ Mac, to stand between investors and banks that grant mortgages. Fannie Mae and Freddie Mac

sell bonds to investors and use the fund to purchase mortgages from banks

The Federal​ Reserve's two main monetary policy targets are

the money supply and interest rates