Chapter 34 Review
While a television news reporter might state that "Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent," a more precise account of the Fed's action would be as follows:
"Today the Fed told its bond traders to conduct open-market operations in such a way that the equilibrium federal funds rate would decrease to 5.25 percent."
Which of the following shifts in aggregate demand and aggregate supply would have an indeterminate effect on equilibrium real GDP
An increase in aggregate supply and a decrease in aggregate demand
In the short run, a decrease in the money supply causes interest rates to
Increase and aggregate demand to shift left
Which of the following explain the shape of the aggregate-demand curve?
Wealth effect amd interest-rate effect
Which of the following shifts aggregate demand to the right?
an increase in the money supply
Other things equal, in the short run a higher price level leads households to
decrease consumption and firms to buy fewer capital goods.
When the fed sells government bonds, the reserves of the banking system
decrease, so the money supply decreases
If the Fed conducts open-market sales, the money supply
decreases and aggregate demand shifts left and gdp decreases
In recent years, the Federal Reserve has conducted policy by setting a target for the
federal funds rate
Which among the following assets is the most liquid
funds in a checking account
If expected inflation is constant, then when the nominal interest rate increases, the real interest rate
increases by the change in the nominal interest rate.
The opportunity cost of holding money
increases when the interest rate increases, so people desire to hold less of it.
The most important reason for the slope of the aggregate demand curve is that as price level
increases, interest rates increase, and investment decreases
An increase in the us interest rate
leads to an appreciation of the US dollar
The interest rate falls if
money demand shifts left or money supply shifts right
In the graph of the money market, the money supply curve is
vertical. It shifts rightward if the Fed buys bonds.
