Question : 17.1   How the Fed Conducts Monetary Policy 1) The main goals : 1228019

17.1   How the Fed Conducts Monetary Policy

1) The main goals of monetary policy include all of the following EXCEPT

A) keeping the long term nominal interest rate equal to the real interest rate plus the inflation rate.

B) keeping the inflation rate low.

C) keeping the unemployment rate close to the natural unemployment rate.

D) attaining the maximum sustainable growth of potential GDP.

E) keeping the long-term interest rate at a moderate level.

2) Which of the following is a monetary policy goal?

i.keeping the inflation rate low

ii.attaining maximum employment

iii.keeping the long-term interest rate at a moderate level

A) i only

B) ii only

C) iii only

D) i and iii

E) i, ii, and iii

3) Monetary policy goals include

i.maximum employment.

ii.stable prices.

iii.moderate long-term interest rates.

A) i only

B) ii only

C) i and iii only

D) i and ii only

E) i, ii, and iii

4) Which of the following is NOT a monetary policy goal?

A) keeping long-term interest rates moderate

B) keeping a high exchange rate for the dollar

C) promoting maximum employment

D) maintaining stable prices

E) All of the above are monetary policy goals.

5) The Federal Reserve monetary policy goals of maximum employment means

A) a zero percent unemployment rate.

B) a zero percent natural unemployment rate.

C) aiming for an amount of employment that exceeds full employment.

D) keeping the unemployment rate close to the natural unemployment rate.

E) cyclical unemployment should not necessarily be minimized.

6) The output gap is the

A) percentage deviation of real GDP from potential GDP.

B) difference between actual inflation and core inflation.

C) percentage increase in the growth rate of real GDP minus the unemployment rate.

D) difference in graduation levels between high school and college.

E) percentage increase in the growth rate of real GDP.

7) When real GDP is less than potential GDP, there is ________ which leads the unemployment rate to ________.

A) an inflationary gap; rise

B) a recessionary gap; decline

C) a recessionary gap; remain at the natural level

D) an inflationary gap; remain at the natural level

E) a recessionary gap; rise

8) When real GDP is greater than potential GDP, there is ________ which leads the inflation rate to ________.

A) an inflationary gap; rise

B) a recessionary gap; remain stable

C) a recessionary gap; rise

D) an inflationary gap; fall

E) a recessionary gap; fall

9) When the output gap is positive, it represents ________ gap, and when it is negative, it represents ________ gap.

A) a recessionary; an inflationary

B) an inflationary; an employment

C) an inflationary; a recessionary

D) an employment; an unemployment

E) None of the above answers is correct.

10) To determine whether the goal of stable prices is being achieved, the Federal Reserve monitors

A) the core GDP deflator inflation rate.

B) the CPI.

C) the producer price index.

D) the core PCE deflator inflation rate.

E) the GDP price deflator.