Fed is open to changing bond policy Question list K Fed policymakers signaled for the first time that they could increase or decrease stimulation of the economy in the future, but not now. Source: Los Angeles Times, May 1, 2013 O Question 18 What are the ripple effects and time lags that the Fed must consider in deciding when to increase or decrease stimulation of the economy? Question 19 The Fed must consider that when it Question 20 O A. raises the federal funds rate, other short-term interest rates rise a few weeks later O B. raises the federal funds rate, the inflation rate decreases about two years later O C. lowers the federal funds rate, the exchange rate falls a few weeks later O Question 21 O D. lowers the federal funds rate, the supply of loanable funds increases up to a year later O E. raises the federal funds rate, the quantity of money decreases on the same day O Question 22 O Question 23 O Question 24 O Question 25K What is the monetary policy strategy followed by the Bank of England and by the Fed? Question list O Question 18 O A. The Bank of England does not announce its inflation target, whereas the Fed targets the inflation rate, makes its inflation target public, commits to hitting the target, and explains how its policy actions will allow it to meet the target. O B. Both the Bank of England and the Fed target the inflation rate, make the inflation target public, commit to hitting the O Question 19 target, and explain how its policy actions will allow it to meet the target O C. The Bank of England targets the inflation rate, makes its inflation target public, commits to hitting the target, and explains how its policy actions will allow it to meet the target, whereas the Fed does not announce its inflation target. O Question 20 O D. Neither the Bank of England nor the Fed announces its inflation target. O Question 21 O Question 22 O Question 23 O Question 24 O Question 25 Checkpoint 3 Test A 2Question list U G) QUESTION A I Question 22 Question 23 Question 24 Question 25 Question 26 Question 27 Question 28 Question 29 Question 30 l Australian GDP to grow faster than expected The Australian economy will grow faster than previously forecast. Growth was driven by a surge in consumer spending after the government distributed more than $20 billion in cash to households and the government has begun spending $22 billion on roads, railways, and schools. The current deficit is $57 billion. Source: Bloomberg.com, November 3, 2009 The economy is no longer in recession. Explain why the faster than expected growth might have pushed the economy into an inationary gap. The faster than expected growth might have pushed the economy into an inationary gap because {:3 A. the $20 billion given to households may increase wage rates and consumption expenditure such that the economy moves above full employment If} B. the spending of $22 billion by the government on roads, railways, and schools increased investment and the economy can move above full employment . the $20 billion given to households may increase consumption expenditure, which increases potential GDP . the $20 billion given to households may increase consumption expenditure such that the economy moves above full employment