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- How do the expansionary and contractionary monetary policy affect the quantity of money?If the Fed decides to leave the federal funds rate target range unchanged, we would expect _______. A. deflation to occur and the unemployment rate to increase B. the recessionary gap to increase C. potential GDP to increase and the full-employment quantity of labor to increase D. inflation to increase and the unemployment rate to decreaseHow did the Fed's monetary policy change during the Great Recession? During the Great Recession, the Fed _______. A. conducted daily open market operations to hit the federal funds rate target B. engaged in quantitative tightening C. conducted monetary policy with limited reserves D. conducted monetary policy with ample reserves
- Which of the following is one of the Fed's policy tools? One of the Fed's policy tools is _______. A. the discount rate, which is the interest rate at which the Fed stands ready to lend reserves to commercial banks B. the required reserve ratio, which equals 3 percent on checkable deposits and 10 percent on savings deposits C. the open market operations, which are purchase of government securities from the government D. the monetary base, which is the sum of coins and Federal Reserve notes2. i) Describe briefly the tools the central bank uses to control the money supply in the economy.ii) Explain briefly why the central bank’s control over the MS is not perfect.Monetary Policy - End of Chapter Problems Ther Fed creates a lower and upper bound for the federal funds rate and the incentives that drive financial institutions to move the federal funds market to that target. a. Select the tool(s) the Fed uses to incentivize financial institutions to move the federal funds market to the targeted federal funds rate. The Fed buys and sells government bonds. borrows money overnight from financial institutions. Incorrect b. Select the tool(s) the Fed uses to create a lower bound for the federal funds rate. The Fed borrows money overnight from financial institutions. lends directly to banks through the discount window. Incorrect pays banks interest on excess reserves. lends directly to banks through the discount window. The Fed c. Select the tool(s) the Fed uses to create an upper bound for the federal funds rate. pays banks interest on excess reserves. lends directly to banks through the discount window. pays banks interest on excess reserves. borrows…
- The Fed is likely to have the higher federal funds rate target range in situation _______ because the higher federal funds rate _______. A. B ; increases the recessionary gap and lowers the core inflation rate B. A ; increases the inflationary gap and lowers the core inflation rate C. A ; decreases the inflationary gap and lowers the core inflation rate D. B ; decreases the recessionary gap and lowers the core inflation rate Thanks!Consider the following scenario: a. In Argentina, the central bank needs to determine by how much to increase the money supply next year. Suppose they estimate an increase in the overall economic activity (real GDP) of 2.5% percent and have a target inflation rate of 4%. The velocity of money has been observed to be constant over the past many years. By what level should the central bank change the money supply to achieve its inflation target? b. Next year, the central bank of Argentina wishes to reduce inflation to 2 percent, and estimates an increase in real GDP by 1.5 percent. What should be the change in the money supply? c. What is an "inflation tax", and how might it explain the creation of inflation by a central bank?a. List the three main tools of monetary policy used by the Fed and briefly describe how each of the tools impacts the money supply and interest rates. b. Give examples of both restrictive and easy monetary policy.
- In which of the following situations is the Fed most likely to raise the federal funds rate target? The Fed is most likely to raise the federal funds rate target when the Fed expects _______. A. high unemployment and a recessionary gap B. high long-term interest rates and a recessionary gap C. low unemployment and an inflationary gap D. banks to hold ample reserves and charge low interest rates on loans thank ss !7)According to the Taylor rule, if inflation has risen by 4 percentage points above its target of 2 percent, the Fed should Group of answer choices grow the money supply at a rate of 6 percent per year. raise the real federal funds rate by 2 percentage points. raise the real federal funds rate by 3 percentage points. raise the real federal funds rate by 6 percentage points.