L21 Inflation and the Federal Reserve

Multiple Choice

A kid who has been saving up for months to buy a telescope...

• Will be hurt by inflation

• Will be helped by inflation

• Will not be affected by inflation

• There is not enough information to say

Multiple Choice

A young couple that just took out a hefty mortgage at a fixed interest rate for their starter home...

• Will be hurt by inflation

• Will be helped by inflation

• Will not be affected by inflation

• There is not enough information to say

Multiple Choice

When the FOMC conducts monetary policy, it sets the target range for

• The Federal Funds Rate

• The Interest on Reserve Balances Rate

• The Overnight Reverse Repurchase Agreement Offering Rate

• Open Market Operations

Multiple Choice

Which monetary policy implementation tool is the primary tool the Fed uses to steer the federal funds rate into the FOMC's target range?

• Open Market Operations

• Interest on reserve balances

• Overnight reverse repurchase agreement facility

• Discount rate

Multiple Choice

When the economy is weakening, what is an appropriate monetary policy response?

• Raise interest rates

• Lower interest rates

Multiple Choice

The Federal Reserve had signaled an intention to lower interest rates... BUT then the data showed that inflation was high and persistent. How might the Federal Reserve's intention to lower interest rates from current high levels have to change?

• The Fed is more likely to lower interest rates SOONER

• The Fed is more likely to WAIT to lower interest rates

Multiple Choice

If you see Unemployment rising and Inflation falling, it's time for the Federal Reserve to:

• Raise Interest Rates

• Lower Interest Rates

• Keep Interest Rates steady

Multiple Choice

If you see Unemployment falling and Inflation rising, it's time for the Federal Reserve to:

• Raise Interest Rates

• Lower Interest Rates

• Keep Interest Rates steady

Poll

What if you saw rising inflation AND rising unemployment? What would you do in that case?

• Raise Interest Rates

• Lower Interest Rates

• Do Nothing

• Not Sure