If the unemployment rate is falling from 4 to 3%, while the inflation rate is increasi from 2% to 4%, the Fed will most likely: decrease the inflation rate by setting a price ceiling. increase the money supply. increase the target range for the federal funds rate. not change much. decrease the target range for the federal funds rate.

When the Fed decreases the discount rate, banks are likely to the money supply their lending and A) increase; increases B) increase; decreases C) decrease; increases D) decrease; decreases

An increase in the money supply occurs when   Question 16 options:   the price level falls.   the interest rate increases.   the Fed makes open-market purchases.   money demand increases.

Suppose the economy is experiencing inflation. If the Federal Reserve enacts contractionary monetary policy, interest rates will likely   Multiple Choice   rise causing prices to decrease.   fall causing prices to increase.   fall causing prices to decrease.   rise causing prices to increase

Assume the inflation rate is 6% and there is every indication that price levels will continue to rise. The Fed should engage in which policy with respect to open market operations: Buy bonds Sell bonds. Increase reserve ratio Decrease reserve ratio

Applied Problems on Monetary Policy and Interest Rates 1. For each of the following questions, draw the Money Demand curve (MD) and Money Supply curve (MS) and label the equilibrium interest rate as i*. Also show how the MS- MD graph changes due to the given events and as a result how the equilibrium interest rate changes. (In your answer you should clearly state and show what happens to the MS and MD curves and also what happens to the interest rate).

The primary instrument of monetary policy for the Fed is the discount rate.     True   False

Suppose that the money supply increases by 20 percent. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP? It must increase by more than 20 percent. It must increase by less than 20 percent. It must increase by exactly 20 percent. None of the above are correct.   Which of the following statements is true of the federal funds market? No banks are refused loans in the federal funds market. In the federal funds market, banks with a shortage of reserves borrow funds, while banks with an excess of reserves lend them out. The interbank lending system works more efficiently in periods of financial panic than in periods of financial stability. Although the federal funds market aims to provide liquidity to needy banks, it is not very popular as overnight loans are logistically inefficient for large banks.   On a graph with real GDP growth on the x-axis and the unemployment rate on the y-axis, you plot each year's values for the United States as…

As per the additional reading “Fed’s response to Inflation Data in Oct 2021”, all the following statements are true EXCEPT   Group of answer choices Worker’s wages have risen 4.2% compared to last year. Supply chain bottlenecks are likely to persist in 2022. The Federal Reserve is going to raise interest rates immediately. The Federal Reserve also announced a plan to start winding down another effort it undertook to help the economy through the pandemic: its purchases of at least $120 billion worth of bonds each month.

Draw and properly label three graphs of money supply-money demand (in one graph), investment demand, and AD-AS (6%). Then, referring to the graphs in your explanation, use one of the three traditional monetary tools to explain how the monetary transmission mechanism works to close recessionary and also inflationary gaps. (9%)