Easy monetary policy refers to increasing the money supply to lower interest rates and encourage spending. Tight monetary policy refers to decreasing the money supply to raise interest rates and discourage spending. The Fed’s decision to shift to a more aggressive course of action by buying Treasury securities and mortgages on an unprecedented scale is an example of ________ monetary policy, and was intended to fight ___________________.
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Consider the demand and supply for money. Buying securities _____________ (increases / decreases) the supply of money, which _____________ (raises / lowers) interest rates.
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According to Mr. Wessel, Mr. Bernanke made it quite clear that he would like some help from Congress. To pursue expansionary fiscal policy, Congress could
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Which of the following groups does NOT benefit from the low interest rates that Mr. Bernanke says will spur spending and lower unemployment?
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The Fed’s three traditional tools are buying and selling securities, changing the discount rate and changing the reserve requirement. The Fed bought securities aggressively. How could it have changed the discount rate and the reserve requirement to fight unemployment?
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According to Mr. Wessel, Mr. Bernanke said the Fed would continue to keep interest rates low until the economy becomes healthy. In December 2014, the St. Louis Federal Reserve Bank reported that the inflation rate was 1.3% and the unemployment rate was 5.8%. Many economists think that the natural rate of unemployment is 4-5%, and that the appropriate rate of inflation is 2-3%. What would the Fed do if it uses these targets and wishes to continue Mr. Bernanke’s policies under new Fed chair Janet Yellen?
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