Macroeconomics final

In times of economic down turn the Fed will engage in ______ monetary policy by _____ bonds.

Expansionary; buying

One of the fiscal policy tools?

Increasing government spending

If the fed sets the federal funds rate equal to 2 plus the inflation rate plus one half the inflation gap plus one half the output gap it is following

The Taylor Rule

The impact of monetary policy tools carried out by:

adjusting the money supply

an expansionary monetary policy that lowers interest rates will cause an increase if all of the following except:

bond prices

Which of the following results is NOT expected when the Federal Reserve lowers its federal target rate?

decrease exports

a negative supply shock causes output to _____ and the price level to _____

decrease; increase

In the Keynesian models when interest rates are so low that monetary policy becomes ineffective it is called:

liquidity trap

If the economy is facing inflationary pressures the fed will:

raise interest rates (contractionary)

A reduction in the interest rates causes consumption and investment to _______ which the aggregate demand curve _____

rise; rightward

If the unemployment rate is 4.5% and the inflation rate is 6% the Fed will most likely:

sell bonds (contractionary event)