Fill in the blanks (1 point each) - Fill in the blank with the correct response

The Fed's goals are 1) __________ employment, 2) __________ prices, and 3) __________ long-term interest rates. The key to achieving them is 4) __________ (maximum employment; stable prices). Financial stability 5) __________ (is; is not) necessary for the Fed to meet its employment and price level goals. To meet its price level goal, the Fed uses the 6) __________ (CPI inflation rate; core inflation rate). The President of the United States 7) __________ (has; does not have) direct control over the Fed's monetary policy. The Fed has selected the 8) __________ (federal funds rate; monetary base) as its monetary policy instrument. To lower the federal funds rate, the Fed will 9) __________ (increase; decrease) banks' reserves using 10) __________.

When the Fed lowers the federal funds rate, other short-term interest rates 11) __________ (fall; rise) and the exchange rate 12) __________ (falls; rises). When the Fed lowers the federal funds rate, the quantity of money 13) __________ (increases; decreases) and the supply of loanable funds 14) __________ (increases; decreases). When the Fed lowers the federal funds rate, the long-term real interest rate 15) __________ (falls; rises) so that consumption expenditure and investment 16) __________ (increase; decrease). When the Fed lowers the federal funds rate, it aims to 17) __________ (increase; decrease) aggregate 18) __________ (demand; supply). To fight a recession, the Fed will 19) __________ (raise; lower) the federal funds rate and to fight inflation the Fed will 20) __________ (raise; lower) the federal funds rate. The linkage between changes in the federal funds rate and changes in real GDP and inflation is 21) __________ (short and tight; long and variable).

Monetary policy that assesses the current situation and then bases the policy on that assessment is 22) __________ (a k-percent rule; discretionary monetary policy). If a central bank uses an inflation targeting rule, the central bank 23) __________ (must; must not) make its inflation rate target public. A strength of inflation targeting is that it 24) __________ (helps people ignore inflation; helps manage people's inflation expectations; easily can be used to fight recessions).