Question

1) Determining monetary policy goals is difficult because:

A. Policy makers must recognize that monetary policy should be changed

B. The most appropriate action must be determined and implemented

C. Policy initiatives must be timed to achieve the desired influence upon the economy

D. All of the above

2)

Federal law requires that the Fed

Select one:

A. report to the Congress regarding the economy and price stability twice each year.

B. meet target ranges for growth in the money supply on an annual basis.

C. reduce the money supply in times of rising stock prices or market volatility.

D. meet each week to determine how to influence U.S. interest rates.

Answer 1

Q1 : D

Monetary policy has a great impact on the economy. Determining that the economy needs a policy change is the first difficult step. Besides that the policy makers needs to determine the best course of action and the interest rate changes to be undertaken. The timing of making the changes is essential to achieve desired results.

Q2: A

The Federal law requires the Fed to report to the Congress regarding the economy and price stability twice each year.

B is incorrect since the Fed is expected to maintain economic stability in the economy and for this the changes in money supply can be made more often that a year.C is incorrect since in times of inflation, the interest rates need to be reduced. For this money supply should be increased. D is incurred as the FOMC meets 8 times a year.