Question :
11) The Taylor rule links the Federal Reserve’s target for : 1244852
11) The Taylor rule links the Federal Reserve’s target for the
A) money supply to shifts in money demand.
B) money supply to changes in interest rates.
C) federal funds rate to economic variables.
D) federal funds rate to the money supply.
12) Suppose that the Federal Reserve Open Market Committee adheres to the ideas expressed by ________. If the economy moves into a recession, the Fed would recommend that the federal funds target rate decrease as long as the inflation rate did not rise above the publicly announced goal for inflation.
A) the gold standard
B) the monetarist school of thought
C) inflation targeting
D) the Taylor Rule
13) Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP equals potential GDP, then the federal funds target rate equals the
A) current discount rate.
B) current inflation rate.
C) real equilibrium federal funds rate.
D) current inflation rate plus the real equilibrium federal funds rate.
14) Using the Taylor rule, if the current inflation rate exceeds the target inflation rate and real GDP exceeds potential GDP, then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.
A) will be greater than
B) will be less than
C) will be the same as
D) may be greater than or less than
15) Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP is less than potential GDP, then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.
A) will be greater than
B) will be less than
C) will be the same as
D) may be greater than or less than
16) Suppose the equilibrium real federal funds rate is 2 percent, the target rate of inflation is 2 percent, the current inflation rate is 4 percent, and real GDP is 2 percent above potential real GDP. If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor rule the federal funds target rate equals
A) 4 percent.
B) 6 percent.
C) 8 percent.
D) 10 percent.
17) Inflation targeting refers to conducting ________ policy so as to commit the central bank to achieving a ________.
A) fiscal; publicly announced level of inflation
B) fiscal; zero inflation rate
C) monetary; publicly announced level of inflation
D) monetary; zero inflation rate
18) Which of the following statements about inflation targeting is true?
A) Inflation targeting by the central banks in other countries has not typically lowered inflation.
B) Inflation targeting would not reduce the flexibility of monetary policy to address other policy goals.
C) Inflation targeting would not allow the central bank the flexibility to take action against a severe recession.
D) Inflation targeting would make it easier for households and firms to form accurate expectations of future inflation, improving their planning and the efficiency of the economy.
19) In the countries that have adopted inflation targeting, the inflation rate has typically
A) increased.
B) decreased.
C) decreased to zero.
D) not changed.
20) Since 2000, the Fed uses ________ to measure inflation.
A) the index of leading economic indicators
B) the personal consumption expenditures index
C) the consumer price index
D) the GDP deflator
E) the producer price index
