-When the Fed fights inflation, _______.

Hello please help me answering those questions and make sure they are answered correctly since i’m doing a prep-study for my macro-economic exam thank you

1.-When the Fed fights​ inflation, _______.

A.an open market purchase increases the federal funds rate

B.a decrease in the supply of loanable funds raises the​ long-term interest rate and increases investment

C.a decrease in the federal funds rate decreases aggregate demand

D.a decrease in bank reserves decreases the quantity of money demanded

2.- Choose the correct statement.

A.The​ long-term bond rate and the​ short-term bill rate move closely together.

B.The​ long-term bond rate and the federal funds rate move closely together.

C.The​ long-term bond rate is higher than the​ short-term rates.

D.The​ long-term bond rate fluctuates more than the​ short-term rates.

3.-As part of its policy to contain the financial​ crisis, the Fed extended deposit insurance.

This action​ _______ bank deposits and​ ________ bank reserves.

A.decreased; increased

B.​decreased; decreased

C.​increased; increased

D.​increased; decreased

4.-Choose the statement that is incorrect.

A.Changes in the federal funds rate change the supply of bank​ loans, which changes the supply of loanable funds and changes the interest rate in the loanable funds market in the short run.

B.The​ long-term interest rate influences expenditure decisions.

C.In the long​ run, demand and supply in the loanable funds market depends on demand and supply in the market for bank reserves.

D.Demand and supply in the market for loanable funds determine the​ long-term real interest​ rate, which equals the​ long-term nominal interest rate minus the expected inflation rate.

5.-The​ Fed’s goals of maximum​ employment, stable​ prices, and moderate​ long-term interest rates are​ _______.

A.an excellent focus for monetary policy but are realistically unattainable

B. in harmony and reinforce each other in the long run but in the short run might come into conflict

C.in harmony and reinforce each other in the long run and in the short run

D.in harmony and reinforce each other in the short run but in the long run might come into conflict

6.-Suppose the Fed uses the Taylor rule to set the federal funds rate.

The inflation rate is 3 percent a year and the output gap is zero percent.

What is the federal funds rate set​ at, according to the Taylor​ rule?

The federal funds rate is set at ____________ percent a year.


​>>> Answer to 1 decimal place.

7.-When the federal fund rate falls relative to the​ long-term bond​ rate, _______.

A.real GDP growth slows one year later

B.the Fed is trying to stimulate real GDP growth

C.real GDP growth speeds up in less than one month

D.the Fed is trying to restrain inflation and slow real GDP growth

8.-Choose the correct statement.

A.FOMC meetings are given high level security and copies of their minutes are available only to the President and the​ cabinet, who are then responsible to communicate the highlights to Congress.

B.Congress plays no role in making monetary policy decisions.

C.The FOMC makes monetary policy decisions throughout the year at randomly chosen times.

D.The President of the United States makes a monetary policy report to Congress twice a year.

9.-A currency drain​ ______ bank deposits and​ _______ bank reserves.

A.​increases; increases

B.​decreases; increases

C.​increases; decreases

D.​decreases; decreases

10.-Choose the statement that is.incorrect.

A.If a 1 to 2 percent core inflation rate is price​ stability, the Fed has not achieved stable prices since the early 1990s.

B.The Fed tries to minimize the output​ gap, which is the percentage deviation of real GDP from potential GDP.

C.The Fed pays attention to the business cycle and tries to steer a steady course between inflation and recession.

D.The Fed regards stable prices as the primary goal of monetary policy.

11.-When the Fed fights​ recession, _______.

A.an open market sale increases the federal funds rate

B.an increase in the supply of loanable funds lowers the​ long-term interest rate and increases investment

C.an increase in the federal funds rate increases aggregate demand

D.an increase in monetary base increases the demand for money

12.-Choose the statement that is incorrect.

A.The Fed uses open market operations to make the quantity of reserves supplied equal the quantity of reserves demanded at the federal funds target rate.

B.The federal funds rate is the opportunity cost of holding reserves.

C.As the federal funds rate​ rises, the quantity of reserves supplied increases.

D.The​ Fed’s open market operations determine the supply of reserves.

13.- Choose the correct statements.





A.Statements are correct.

B.Statements are correct.

C.Statements are correct.

D.Statements are correct.

14.-Choose the statement that is incorrect.

A.The Fed moves the federal funds rate to its target level by using open market operations to adjust the quantity of monetary base.

B.Between 2002 and 2004 and again in and since​ 2008, the federal funds rate was set at historically low levels.

C.In the federal funds​ market, the higher the federal funds​ rate, the smaller is the quantity of overnight loans supplied.

D.Since​ 2000, the federal funds rate has ranged between a high of 6.8 percent and a low of 0.2 percent a year.

15.-To determine whether the goal of stable prices is being​ achieved, the Fed pays closest attention to the​ _______.

A.core PCE​ deflator, which is the PCE deflator excluding food and fuel

B.CPI including food and fuel because the prices of food and fuel can have extreme effects on the economy

C.GDP deflator because the GDP deflator measures the price level in the entire economy and not just those prices faced by consumers

D.core inflation rate because it is more volatile than the total CPI inflation rate

16.-Suppose the Fed raises the federal funds rate. Describe the ripple effects of this monetary policy.

Other​ short-term interest rates and the exchange rate​ ______.

The quantity of money and supply of loanable funds​ ______.


A.​fall; increase

B.​rise; increase

C.​rise; decrease

D.​fall; decrease

*The​ long-term real interest rate ▼



*Consumption​ expenditure, investment, and net exports ▼



*Aggregate demand​ ______.

Real GDP growth and the inflation rate​ ______.

A.​decreases; increase or remain the same

B.​decreases; decrease

C.​increases; increase

D.​increases; decrease or remain the same

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