1. 1

2. 33
Monetary Policy
CLICKER QUESTIONS 2

3. Checkpoint 33.1 Checkpoint 33.2 Checkpoint 33.3 Question 1 Question 4

4. CHECKPOINT 33.1
Question 1
The operational goals that the Fed uses for its monetary policy objectives are the ________.
federal funds rate and the supply of reserves
the demand for reserves and the supply of reserves
supply of reserves and the output gap
core inflation rate and the output gap
federal funds rate and the core inflation rate
Answer: D

5. CHECKPOINT 33.1
Question 2
The Fed’s monetary policy instrument is ________.
the output gap
the core inflation rate
the federal funds rate
the supply of reserves
the demand for reserves
Answer: C

6. CHECKPOINT 33.1
Question 3
To lower the federal funds rate, the Fed conducts an open market ____ of securities which ____.
sale; increases the demand for reserves
sale; increases the supply of reserves
purchase; increases the demand for reserves
purchase; decreases the demand for reserves
sale; decreases the demand for reserves
Answer: D

7. CHECKPOINT 33.2
Question 4
When the Fed raises the federal funds rate, ______ responds most rapidly.
consumption expenditure
the supply of loanable funds
the long-term real interest rate
other short-term interest rates
the inflation rate
Answer: D

8. CHECKPOINT 33.2
Question 5
When the Fed lowers the federal funds rate, the quantity of bank reserves ____, and quantity of money ____.
increases; does not change
increases; decreases
decreases; does not change
decreases; increases
increases; increases
Answer: E

9. CHECKPOINT 33.2
Question 6
To fight inflation, the Fed will ____ the federal funds rate to bring about a ____.
raise; decrease in aggregate demand
raise; decrease in aggregate supply
raise; increase in aggregate supply
lower; increase in aggregate supply
lower; decrease in aggregate demand
Answer: A

10. CHECKPOINT 33.2
Question 7
When the Fed raises the federal funds rate, the same or next day U.S. exchange rate ____, about a year later U.S. net exports ____, and two years later U.S. inflation _____.
rises; do not change; increases
falls; increase; decreases
rises; decrease; decreases
rises; increase; decreases
falls; decrease; increases
Answer: C

11. CHECKPOINT 33.3
Question 8
The Fed doesn’t pursue discretionary monetary policy because it _____.
usually leads to higher inflation
is a long-term policy and monetary actions need to be short term
makes inflation expectations harder to manage
cannot be implemented using changes in the federal funds rate
takes time to implement
Answer: C

12. CHECKPOINT 33.3
Question 9
Inflation targeting requires the central bank to ____.
use a short-term interest rate as its policy instrument
adopt a k-percent rule for the inflation rate
avoid changing the amount of the money
publicize its targeted inflation rate and explain how it will achieve that target
set a fixed price for gold and other real assets
Answer: D

13. CHECKPOINT 33.3
Question 10
Under a gold standard, the central bank _____.
uses the federal funds rate to conduct monetary policy
converts its currency into gold on demand
intervenes in the market for gold to keep the dollar price of gold fixed at a specified level.
makes the monetary base consistent of only gold
is willing to publish its expected inflation rate
Answer: C