When the Fed controls the rate of growth of the money supply to foster macroeconomic stability, this is called: A. Fiscal Policy B. Monetary Policy C. Money Supply Policy D. Fed Policy
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When the Fed controls the rate of growth of the money supply to foster
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- Suppose that the Bank of Canada determines that the Canadian economy is currently overproducing. What can the Central Bank do to slow down economic activity? a. The Central bank can pursue an expansionary monetary policy by increasing the money supply, causing a decrease in the interest rate. As a result, real GDP will increase and the price level will increase. b. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing a decrease in the interest rate. As a result, real GDP will decrease and the price level will decrease c. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will decrease. d. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will increase e. The…If the Fed unexpectedly shifts to a more restrictive monetary policy, which of the following will most likely occur in the short run? a. An increase in inflation b. An increase in real GDP c. An increase in unemployment“Monetary policy is the macroeconomic policy laid down by the central bank of an economy.”In terms of the above statement, explain how monetary policy can be used to combat inflation
- In modern developed economies, central banks (like the U.S. Federal Reserve System) perform at least two major tasks; they: Select one: a. conduct fiscal policy and serve as financial intermediaries. b. control the money supply and collect tax revenues. c. conduct fiscal policy and serve as lenders of last resort. d. control the money supply and regulate banks.a) Identify the four major tools of monetary policy. b) How can monetary policy address the problem of inflation?The economy's unemployment rate is 2% and the inflation rate is 18%. The most appropriate policy for the Governor of the New York Fed to pursue would be: a. do nothing because the unemployment rate is too low.b. increase the money supply to try to reduce the unemployment rate. c. increase the money supply to try and increase the unemployment rate. d. none of the other responses are correct. e. reduce the money supply to try to reduce the inflation rate.
- What is the main argument for having a Central Bank independent from the government for the purposes of monetary policy? Select one: a. An independent Central Bank would have more resources available to devote towards implementing monetary policy b. An independent Central Bank would be more knowledgeable about the state of the economy. Consequently, the Central Bank would be better suited to implementing monetary policy c. The Central Bank is more credible in its inflation and cash rate targets. Consequently, inflation expectations will adjust appropriately to monetary policy announcements d. Having an independent Central Bank prevents any economic trade-offs when making monetary policy choicesThe Fed wants to decrease the money supply when the economy is booming and inflationary pressures ________ in the economy.The Fed uses monetary policy to affect the supply and demand for money. The monetary policy affects interest rates, aggregate spending, and economic growth. How does the Fed’s policies have the power to prevent recessions. Should the Fed intervene to prevent recessions?
- Which of the following is true for monetary policy? Select one: a. As a contractionary monetary policy, the Bank of Canada can increase the target for the overnight rate. b. As an expansionary monetary policy, the central bank can buy bonds from the public to reduce a inflationary gap. c. The central bank can sell bonds during an economic downturn in order to stabilize the economy. d. The central bank can use open market operations to change the target for the overnight rate.What is the expected impact of a decline in the money supply to the US economy? A. Higher aggregate prices (inflation) B. Lower aggregate prices (deflation) C. There is no general relationship between the money supply and inflatonThe Central Bank of Colombia required banks to decrease their cash reserve ratio. What will be its effect? a.Decrease in the aggregate supply b.Increase in money supply available for loans c.Increase in the aggregate supply d.Decrease in money supply available for loans
