Exploring the New Version of Rational Expressions

What are the three macroeconomic goals central banks aim to achieve using monetary policy?

• Inflation, deflation, and stability

• Stable prices, full employment, and economic growth

• Trade surplus, budget balance, and currency stability

• Interest rate stability, stock market growth, and trade balance

What does an increase in the money supply typically lead to?

• A decrease in the nominal interest rate

• No change in the nominal interest rate

• An increase in the nominal interest rate

• A decrease in the federal funds rate

What is the primary effect of contractionary monetary policy?

• Increase in gross investment

• Decrease in unemployment

• Increase in economic growth

• Decrease in the money supply

What is the effect of increasing the discount rate in a scarce reserve system?

• It increases the federal funds rate

• It has no effect on the money supply

• It decreases the money supply

• It increases the money supply

Which tool is primarily used by the Federal Reserve in an ample reserve system to maintain ample reserves?

• Open market operations

• Interest on reserves

• Discount rate adjustments

• Reserve requirement changes

What does the federal funds rate influence in the economy?

• The unemployment rate directly

• Interest rates throughout the economy

• The inflation rate directly

• The price of government bonds

How does the Federal Reserve influence the policy rate in an ample reserve system?

• By adjusting the discount rate

• Through open market operations

• By modifying the reserve requirement

• By changing the interest on reserves

What happens to the aggregate demand curve when expansionary monetary policy is implemented?

• It shifts to the left

• It remains unchanged

• It shifts to the right

• It becomes more elastic

In an ample reserve system, what happens when the supply of reserves intersects the demand curve at the lower bound?

• Changes in the supply of reserves have no impact on the policy rate

• The discount rate directly changes the policy rate

• Changes in the supply of reserves impact the policy rate

• Open market operations impact the policy rate

What is a potential exam question scenario regarding monetary policy actions?

• Questions will only ask about contractionary policies

• Questions may ask about policies that worsen economic problems

• Questions will focus solely on ample reserve systems

• All questions will have clear, positive outcomes