ECON ch 14

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The Board of Governors has ________members, and they are appointed for ________year terms.

7;14

Using aggregate supply and demand curves drawn according to the Keynesian view, which of the following will occur if the Fed buys bonds in the open market and the economy is below full employment?

Aggregate demand will shift to the right and the unemployment rate will fall.

Which of the following best describes the cause-effect chain of expansionary monetary policy?

An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and real GDP.

Which of the following will happen when the Federal Reserve lowers the interest rate paid on reserve balances?

Banks will choose to lend into the money market instead of lending to the Fed

The key decision maker for general Federal Reserve policy is the

Board of Governors

If the Federal Reserve authorities were attempting to reduce inflation, the proper policies would be to

Decrease the money supply with negative forward guidance, a higher federal funds target range, increases in the IORB and ON RRP, and/or quantitative tightening.

The buying and selling of government bonds to influence reserves in the banking system is the responsibility of the

Federal Open Market Committee.

U.S. monetary policy relies on the

Federal Reserve System's control over the money supply.

Which of the following is true about the chairman of the Federal Reserve Board of Governors?

The chairman can be reappointed for more than one term.

Given an upward-sloping aggregate supply curve, which of the following is most likely to occur if the Fed pursues restrictive monetary policy, Ceteris paribus?

The equilibrium price level and output will both decrease.

if a bank does not have enough reserves, it can

borrow reserves from the discount window

If the Fed wants to increase bank reserves, it can

buy bonds

One of the strengths of monetary policy relative to fiscal policy is that monetary policy

can be implemented more quickly.

In a reverse repo transaction,

collateral in the form of a Treasury security will be required.

Refer to the chart. Ceteris paribus, if the Federal Reserve increases the discount rate, this indicates a desire to _________blank the money supply and will cause a shift from _________blank.

contract; AD2 to AD1

If the Fed sells more bonds to the public, then the money supply will

decrease and the aggregate demand curve will shift to the left.

In 2008, the Fed _________ the discount rate in order to _________ the economy.

decreased; stimulate

Monetary policy directed at expanding GDP growth would include the following?

decreasing the discount rate and buying bonds

Which of the following actions by the Fed will most likely increase nonbank financial firms lending?

decreasing the overnight reverse repo rate

Suppose the Fed decreases interest rates by half of a percent. The Fed has most likely reduced the

discount rate

Expansionary monetary policy will

encourage people to borrow more money.

Which of the following will cause an increase in aggregate demand?

expansionary monetary policy

The basic money supply

includes currency and transactions accounts.

If the Fed buys more bonds from the public, then the money supply will

increase and the aggregate demand curve will shift to the right.

If the Fed wants to discourage bank lending, it will

increase the interest paid on reserve balances held at the Fed.

The three main tools of monetary policy are

open-market operations, forward guidance, and changing the administered interest rates

Which of the following actions by the Fed would cause the money supply to increase?

optimistic forward guidance

According to the Monetarist view, the aggregate supply curve is

perfectly vertical at the natural rate of unemployment.

the federal reserve system changes the money supply by

providing forward guidance about how it intends to conduct monetary policy

Which of the following Fed actions will decrease the money supply?

raising the overnight reverse repo rate

When the Fed sells bonds in the open market, interest rates ________and aggregate demand shifts to the ________

rise; left

If the Fed wants to decrease the money supply, it can

sell government bonds

When the Fed announces that it is raising the federal funds rate, this signals its intention to _____bonds in the open market and ________the money supply.

sell; reduce

monetary policy involves the use of money and credit controls to

shift the aggregate demand curve

which of the following is responsible for holding bank reserves?

the 12 regional Federal Reserve banks

In a reverse repo transaction,

the Fed borrows money from nonbank financial firms

The discount rate is the interest rate charged by

the Federal Reserve when it lends money to private banks.

Ceteris paribus, if the Fed reduces the discount rate, then

the incentive to borrow funds increases.

If the Federal Reserve System buys government securities,

the money supply will increase.

open-market operations refer to

the purchases and sales of US government securities by the Fed

The Fed's inability to stimulate the economy by reducing interest rates is known as the

zero lower bound problem

The Federal Reserve System's three administered rates are the

IORB rate, ON RRP rate, and discount rate.

The rate of interest banks charge each other for lending reserves is the

federal funds rate

Refer to the figure. Suppose the Federal Reserve buys bonds in the open market. The money supply will ________ and cause a shift from ________.

increase; AD1 to AD2

The 12 regional Fed banks do all of the following except

lend money to individuals.

A neutral monetary policy is a Fed policy in which

the money supply and interest rates are left as they are.


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