Flashcard on Monetary Policy and the Federal Reserve

Front

Who guides the operation of the Federal Reserve System?

Back

The Board of Governors

Front

Who selects the Fed chair?

Back

The President with Senate confirmation

Front

What is the Fed's inflation target?

Back

2%

Front

If nominal wages do not change and the inflation rate is 2 percent, then

Back

real wages are effectively cut by 2 percent.

Front

What does the Fed target when trying to influence the real interest rate?

Back

The nominal interest rate

Front

What is another name for the Fed rule-of-thumb?

Back

The Taylor Rule

Front

What is a potential downside of following a strict rule in setting interest rates?

Back

It can prevent reducing rates below zero.

Front

Which of the following acts a floor for the federal funds rate? Options: the required reserve ratio, the discount rate, interest on reserves, the growth rate of real GDP

Back

interest on reserves

Front

Everything else constant, if interest rates in the U.S. rise, then the value of the U.S. dollars tends to

Back

appreciate (i.e., rise).

Front

Which of the following acts as a ceiling for the federal funds rate?
Options:
the discount rate,
the rate of inflation,
the required reserve ratio,
interest on reserves

Back

the discount rate