Economics Chapter 15
when the price of a financial asset falls, its interest rate will
rise
What would cause the money demand curve to shift to the left
A decrease in real GDP
What is contractionary monetary policy?
Federal reserve sells bonds to decrease money supply and increase interest rates
If the fed lowers its target for the federal funds rate, this means
The fed is pursuing an expansionary monetary policy
Monetary policy refers to the actions the
Federal Reserve takes to manage the money supply and interest rates to pursue its economic objectives
Expansionary monetary policy refers to the ______ to increase real GDP
Federal Reserve's increasing the money supply and decreasing interest rates
What is expansionary monetary policy?
Federal reserve buys bonds to increase money supply and decrease interest rates
The Federal Reserve's two main monetary policy targets are
Money Supply and interest rates
An increase in the price level causes
The money demand curve to shift to the left
Why does the money demand curve have a negative slope
because an increase in the interest rate decreases the quantity of money demanded
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
An increase in the interest rate
increases the opportunity cost of holding money, and a movement up along the money demand curve
An increase in real GDP can shift
money demand to the right and increase the equilibrium interest rate
What are the Federal Reserve's four goals of monetary policy
price stability, high employment, economic growth, and stability of financial markets