28 terms

Macroeconomics- Monetary Policy

Review for final. Covers Monetary Policy homework (excluding #22-25), and quiz
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When the interest rate falls, the:
Total amount of money demanded increases
If the interest rate rises, there will be a(n):
Decrease in the total amount of money demanded
In which case would the quantity of money demanded by the public tend to increase by the greatest amount?
The interest rate decreases the nominal GDP increases
The interest rate will fall when the:
Quantity of money supplied exceeds the quantity of money demanded
Assume that the stock of money is determined by the Federal Reserve and does not change when the interest rate changes. This situation means that the:
Supply of money curve is vertical
An increase in the money supply is likely to decrease:
Interest rates
Monetary policy in the United States is the responsibility of the:
Federal Reserve
The fundamental objective of monetary policy is to assist the economy in achieving:
A full-employment, non-inflationary level of total output
Which one of the following is a tool of monetary policy for alternating the reserves of commercial banks?
Open-market operations, Discount rate, Reserve ratio
If the Fed buys government securities from the commercial banks in the open market:
Commercial banks give the securities to the Fed, and it pays for them by increasing the reserves of commercial banks at the Fed
Which increases the excess reserves of commercial banks?
The central banks buy bonds from commercial banks
The Federal Reserve could increase the money supply by:
Buying government bonds on the open market
The major purpose of the Federal Reserve buying government securities in open market operations is to:
Allow banks to increase their lending
The most frequently used monetary device for achieving price stability is:
Open-market operations
If the Board of Governors of the Federal Reserve System increases the legal reserve ratio, this change will:
Decrease the excess reserves of member banks and thus decrease the money supply
Lowering the discount rate has the effect of:
Making it less expensive for commercial banks to borrow from the central banks
A television report states: "The Federal Reserve will lower the discount rate for the fourth time this year." This report indicates that the Federal Reserve is most likely trying to:
Stimulate the economy
The interest rate that lending depository institutions charge borrowing institutions for the use of excess reserves is the:
Federal funds rate
According to the Taylor rule, when real GDP is equal to potential GDP, and the inflation rate is equal to its target rate of two percent, the Federal funds rate should be:
4 percent and this implies a real interest rate of 2 percent
The Fed can change the money supply by:
changing bank reserves through sale or purchases of government securities, changing quantities of required and excess reserves by alternating the legal reserve ration, changing the discount rates as to encourage or discourage commercial banks in borrowing from central banks
Which is not a tool of monetary policy?
changes in banking laws
Open-market operations refer to:
the purchase or sale of government securities by the Fed
If the Federal Reserve System buys government securities from commercial banks and the public:
it will be easier to obtain loans at commercial banks
The purchase of government securities from the public by the De will cause:
commercial bank reserves to decrease
A decrease in the reserve ration increases the:
amount of actual reserves in the banking system
The discount rate is the interest:
rate at which the Federal Reserve Banks lend to commercial banks
When the Fed lends money to a commercial bank, the bank:
Increases its reserves and enhances its ability to extend credit to bank customers
Which of the following tools of monetary policy is considered the most important?
Open-market operations
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