Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the COVID-19 pandemic, higher food and energy prices, and broader price pressures. Furthermore, Russia's war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3 to 3-1/4 percent and anticipates that ongoing increases in the target range will be appropriate.

1. From the above statement, why did the Committee feel it needed to raise the target on the federal funds rate? Price stability Maximum employment Both price stability and maximum employment Not enough information is given

2. How will the Federal Reserve achieve this new target on the federal funds rate in an ample reserve monetary regime? An open market purchase of securities (bonds) by the Fed to increase the supply of reserves An increase in the interest rate on reserve balances A decrease in the interest rate on reserve balances An open market sale of securities (bonds) by the Fed to decrease the supply of reserves

3. How will arbitrage work for the target on the federal funds rate to align with the actual federal funds rate? The increase in competition for funds in the federal funds market will pull the federal funds rate higher The increase in competition for funds in the federal funds market will push the federal funds rate lower The increase in supply of funds in the federal funds market will pull the federal funds rate lower The increase in supply of funds in the federal funds market will pull the federal funds rate higher

4. As a result of the increase in the target on the federal funds rate, what will happen to the discount rate and the overnight reverse repurchase rate? Decrease Increase Remain the same

5. Which Federal Reserve District's president is always a voting member of the Federal Open Market Committee? Atlanta Boston Philadelphia New York

6. Aggregate demand refers to the relationship between: Inflation and the quantity of a good supplied. Inflation and the quantity of real GDP demanded. Inflation and the quality of a good produced. Inflation and the quality of a good supplied.

7. Aggregate demand for goods and services will fall if The interest rate on reserve balances decreases. The inflation rate increases. Imports decrease. Government expenditure increases.

8. Ceteris paribus, as inflation increases in the ample reserve monetary policy regime, the Federal Reserve will ______ the ____, causing a(n )_____ in the ____ Increase; interest rate on reserve balances; increase; federal funds interest rate. Decrease; interest rate on reserve balances; decrease; federal funds interest rate. Increase; interest rate on federal funds; increase; interest on reserve balances. Decrease; interest rate on federal funds; decrease; interest on reserve balances.

9. Ceteris paribus, in the ample reserve monetary policy regime, as the unemployment rises and the inflation rate falls below the Federal Reserve's target range, the FOMC will ______ the ____, resulting in a(n) _____ in the ____ Increase; interest rate on reserve balances; increase; federal funds interest rate. Decrease; interest rate on reserve balances; decrease; federal funds interest rate. Increase; purchase of government securities; increase; federal funds interest rate. Decrease; sale of government securities; decrease; federal funds interest rate.

10. Aggregate demand _____ when inflation____because the dual mandate of the Federal Reserve will cause the Federal Reserve to pursue ______ monetary policy by directly ____ the interest rate on ______ Falls; falls; expansionary; decreasing; reserve balances. Rises; rises; contractionary; increasing; reserve balances. Falls; rises; contractionary; increasing; reserve balances. Falls; rises; expansionary; increasing; reserve balances.

11. A decrease in the interest on reserve balances will ultimately cause a ______ in the ______ that will cause investment expenditures to ____ and consumption to _____ Decrease; federal funds rate; rise; rise. Rise; federal funds rate; decrease; decrease. Rise; federal funds rate; rise; rise. Decrease; federal funds rate; decrease; decrease.

12. Holding all else constant (including monetary policy), as inflation decreases, the real interest rate would: Increase Decrease Stay the same May increase, decrease, or stay the same.

13. When interest rates are lower, consumers and companies can borrow money cheaply to make major purchases. As a result, the aggregate demand for goods in an economy will Decrease Increase Remain the same Be minimally affected.