Question : 17.1   What Is Monetary Policy? 1) Hovnanain Enterprises, a residential home : 1244836

17.1   What Is Monetary Policy?

1) Hovnanain Enterprises, a residential home builder based in New Jersey, did well during the mid-2000s but did not do so well in during and immediately after the recession of 2007-2009. The reason for this is

A) the Fed kept low interest rates in the mid-2000s but raised interest rates in 2007 to help fight inflation.

B) the Fed kept low interest rates in the mid-2000s but by 2007 the housing bubble had burst.

C) the Fed raised interest rates in the mid-2000s but lowered interest rates in 2007 to revive the housing market.

D) the Fed raised interest rates in the mid-2000s and raised interest rates in 2007 to help fight inflation.

2) If the probability of losing your job remains ________, a recession would be a good time to purchase a home because the Fed usually ________ interest rates during this time.

A) low; lowers

B) low; raises

C) high; lowers

D) high; raises

E) low; does not change

3) Monetary policy refers to the actions the

A) President and Congress take to manage the money supply and interest rates to pursue their economic objectives.

B) Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives.

C) President and Congress take to manage government spending and taxes to pursue their economic objectives.

D) Federal Reserve takes to manage government spending and taxes to pursue its economic objectives.

4) The Federal Reserve System’s four monetary policy goals are

A) low government budget deficits, low current account deficits, high employment, and a high foreign exchange value of the dollar.

B) low rate of bank failures, high reserve ratios, price stability, and economic growth.

C) price stability, high employment, economic growth, and stability of financial markets and institutions.

D) price stability, low government budget deficits, low current account deficits, and low rate of bank failures.

5) When the Federal Reserve System was established in 1913, its main policy goal was

A) encouraging strong economic growth.

B) promoting price stability.

C) preventing bank panics.

D) keeping employment high.

6) The top policy goal for Paul Volcker when he became chairman of the Federal Reserve’s Board of Governors in 1979 was

A) fighting inflation.

B) increasing employment.

C) increasing economic growth.

D) increasing regulation of commercial banks.

E) a low current account deficit.

7) During the turmoil in the market for subprime mortgages in 2007 and 2008, the Fed increased the volume of discount loans. The goal of the Fed was to

A) reduce the rate of inflation.

B) stimulate economic growth.

C) reduce unemployment.

D) reassure financial markets and promote financial stability.

E) reduce the current account deficit.

8) The goals of monetary policy tend to be interrelated. For example, when the Fed pursues the goal of ________, it also can achieve the goal of ________ simultaneously.

A) high employment; economic growth

B) high employment; lowering government spending

C) economic growth; a low current account deficit

D) stability of financial markets; a low current account deficit

9) Monetary policy refers to the actions the Federal Reserve takes to manage

A) the money supply and income tax rates to pursue its economic objectives.

B) the money supply and interest rates to pursue its economic objectives.

C) income tax rates and interest rates to pursue its economic objectives.

D) government spending and income tax rates to pursue its economic objectives.

10) Which of the following are goals of monetary policy?

A) maximizing the value of the dollar relative to other currencies, economic growth, and high employment

B) price stability, maximizing the value of the dollar relative to other currencies, and high employment

C) price stability, economic growth, and high employment

D) price stability, economic growth, and maximizing the value of the dollar relative to other currencies