Question : 71) The Fed raises the interest rate when it A) fears : 1238239

71) The Fed raises the interest rate when it

A) fears recession.

B) wants to increase the quantity of money.

C) fears inflation.

D) wants to encourage bank lending.

E) cannot change the quantity of money.

72) When the Federal Reserve wants to slow inflation, it

A) lowers the federal funds rate.

B) raises the federal funds rate target.

C) cuts the federal funds rate target aggressively to almost zero.

D) increases aggregate income, output, and employment.

E) increases taxes on interest income.

73) If the Fed fears inflation, it ________ by ________ government securities.

A) increases aggregate demand; selling

B) increases aggregate supply; buying

C) decreases aggregate demand; selling

D) decreases aggregate supply; buying

E) decreases aggregate supply; selling

74) If the Fed fears inflation, then the Fed

A) directs banks to lower the nominal interest rate.

B) directs banks to raise the nominal interest rate.

C) will sell government securities in the open market.

D) will buy government securities in the open market.

E) will increase the income tax rate on interest income.

75) The Fed is concerned that inflation might occur. To help eliminate this possibility, the Fed could ________ government securities to ________ the federal funds rate in the short run.

A) buy; lower

B) buy; raise

C) sell; lower

D) sell; raise

E) sell; not change

76) When the Fed worries about inflation, it ________ the federal funds rate and, in the short run, ________ the real interest rate.

A) lowers; lowers

B) lowers; raises

C) raises; lowers

D) raises; raises

E) does not change; the Fed raises

77) When the Fed fears inflation, the Fed ________ government securities, so that the federal funds rate ________ and the quantity of money ________.

A) sells; falls; decreases

B) sells; rises; decreases

C) sells; falls; increases

D) buys; falls; increases

E) buys; rises; decreases

78) When the Fed raises the federal funds rate, eventually there is

A) an upward movement along the investment demand curve and along the aggregate demand curve.

B) an upward movement along the investment demand curve and the aggregate demand curve shifts leftward.

C) an upward movement along the investment demand curve and the aggregate demand curve shifts rightward.

D) a leftward shift of the investment demand curve and the aggregate demand curve shifts leftward.

E) a leftward shift of both the aggregate demand curve and the aggregate supply curve.

79) If the AS and the AD curve intersect at a level of real GDP that exceeds potential GDP, then the appropriate monetary policy is one that ________ the federal funds rate and ________ aggregate demand.

A) raises; increases

B) raises; decreases

C) lowers; increases

D) lowers; decreases

E) raises; has no effect on

80) If real GDP exceeds potential GDP, to move the economy to potential GDP the Fed

A) raises the federal funds rate to increase potential GDP but not real GDP.

B) lowers the federal funds rate to decrease real GDP but not potential GDP.

C) raises the federal funds rate to decrease real GDP but not potential GDP.

D) lowers the federal funds rate to increase potential GDP but not real GDP.

E) raises the federal funds rate to decrease both real GDP and potential GDP.