Chapter 17 Macroeconomics
The Federal Open Market Committee meets ________ times per year
8
The Federal Reserve monetary policy goals of maximum employment means
Keeping the unemployment rate close to the natural unemployment rate
To fight a recession, the Fed can ________ the federal funds rate by ________ securities
Lower; buying
The core inflation rate measures changes in the
Prices of consumer goods except food and fuel
To fight inflation, the Fed can ________ the federal funds rate by ________ securities
Raise; selling
If the Fed raises the federal funds rate, eventually the
AD curve shifts leftward and real GDP decreases
If the Fed lowers the federal funds rate, eventually the
AD curve shifts rightward, increasing real GDP and raising the price level
When the output gap is positive, it represents ________ gap, and when it is negative, it represents ________ gap
An inflationary; a recessionary
A change in monetary policy affects
Consumption expenditure, investment, and net exports
An increase in the federal funds rate results in a(n) ________ in the real interest rate which leads to a(n) ________ in investment
Increase; decrease
When the Fed lowers the federal funds rate, aggregate demand
Increases
When the Fed lowers the federal funds rate, the quantity of money ________ and the supply of loanable funds ________
Increases; increases
Monetary policy produces ripple effects, some of which happen quickly and some that can take years to produce change. Which of the following takes the longest to change?
Inflation rate
When the Fed raises the federal funds rate, the consumption expenditure ________ and investment ________
Decreases; decreases
If the Fed bases its monetary policy on judgments of its policymakers about the current needs of the economy, it is following a
Discretionary policy
Monetary policy decisions are made by the
Federal Open Market Committee (FOMC)
The Fed's choice of monetary policy instrument is the
Federal funds rate
The interest rate banks charge each other on loans of reserves is called the
Federal funds rate
The FOMC is the
Group within the Fed that conducts monetary policy
The Federal Reserve's policy goals include I. maximum employment II. stable prices III. moderate long-term interest rates
I, II, and III
To pursue its monetary policy goals, the Fed could use i. a nominal GDP targeting rule ii. a money targeting rule iii. an inflation targeting rule
i, ii, and iii