Show:
Pros and Cons
FP vs. MP
Tools of MP
Government
Examples
100
What form of Monetary Policy can reduce Unemployment rate in a recession?
Expansionary Monetary Policy
100
Which policy is used as a tool to stabilize the economy by using taxes?
Fiscal Policy
100
What do lower interest rates encourage?
It encourages consumer and business spending
100

Which policy is the government in charge of?

Fiscal Policy

100

This Federal Reserve action in 2008 dropped interest rates to nearly zero, making borrowing cheaper to stimulate economic activity during the financial crisis. This is called?

What is quantitative easing?

200
What happens when the money supply grows too fast?
The inflation rate will increase
200
Monetary Policy is a tool of the ___
The Federal Reserve
200
What are Open Market Operations?
The purchasing and selling of government bonds
200

By raising or lowering interest rate, what can the Fed control ?

level of borrowing and consuming

200

To combat runaway inflation in the early 1980s, Fed Chairman Paul Volcker dramatically raised this key interest rate to over 20%, triggering a recession but eventually taming price increases. What tool did he use?

What is the federal funds rate?

300
How long does it take before a change in monetary policy takes effect?
3 months to 2 years
300

Who controls Fiscal Policy?

The Government

300
What is the Required Reserve Ratio?
Banks must always keep a fraction of their clients deposit.
300

What is Monetary Policy used for?

It is for increasing or decreasing the level of economic activity.

300

Japan's central bank implemented this controversial policy in 2016, charging financial institutions to hold deposits in an attempt to encourage lending and fight deflation. What tool is this?

What are negative interest rates?

400
If the growth of the money supply slows down what will happen to the economic growth?
The economic growth will decrease.
400
What are both policies used for in the short run ?
to influence the economy
400
How is the Required Reserve Ratio used as a tool by the Monetary Policy?
It creates a relatively predictable demand for loans in the federal funds market
400

Explain the Keynesian Multiplier

This economic concept, developed by John Maynard Keynes, explains how $1 of government spending can generate more than $1 in total economic activity as money passes from person to person.

400

During the 2020 pandemic, the Federal Reserve engaged in this practice of purchasing large amounts of government bonds and mortgage-backed securities to inject money into the economy. What tool did they use?

What is open market operations?

500
What stimulates exports of American goods?
A depreciating currency
500
What are the three objectives of Monetary Policy?
To achieve price stability, full employment, and stable economic growth
500

Explain what open mouth operations are or moral suasion

What is the system of influence of the Reserve Bank governor who talks the markets down without changing interest rates.

500

What are the two primary Macroeconomic goals of the Government?

To maximize sustainable output, employment, and to stabilize economic growth and inflation

500

China uses this tool to manage its currency's value against the dollar, buying or selling foreign currency reserves to maintain export competitiveness. What is this tool called?

What is exchange rate intervention?