ch 15

Which of the following describes what the Fed would do to pursue an expansionary monetary policy?

use open market operations to buy treasury bills.

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.

If the fed lowers its target for the federal funds rate, this indicates that

the fed is pursuing an expansionary monetary policy.

An increase in the price level causes

the money demand curve to shift to the right.

Which of the following would cause the money demand curve to shift to the left?

A decrease in real GDP.

Using the money demand and supply model, an open market sale of Treasury securities by the federal reserve would cause the equilibrium interest rate to

Increase

The Federal reserve's two main monetary policy targets are

The money supply and interest rates

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

An increase in the interest rate causes

a movement up along the money demand curve.

An open market purchase of Treasury securities by the federal reserve would cause the equilibrium interest rate to

decrease

When the price of a financial asset __ its interest rate will __.

falls; rise

For purposes of monetary policy, the Federal Reserve has targeted the interest rate known as the

federal funds rate.

An increase in the interest rate

increases the opportunity cost of hold money.

An increase in real GDP can shift

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

if the fed buys treasury bills, this will shift the

money supply curve to the right.

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.

The federal reserve can affect directly its monetary policy __, which then affect its monetary policy __.

target; goals.