These questions cover an expansionary monetary policy. Assume the textbook presentation where monetary policy works without any problem. Except for question 1, your answers can be a single word.
1) Give a brief summary of the macroeconomic circumstances that would lead the
Federal Reserve to engage in an expansionary policy.
2) Would the Fed buy or sell government debt assets with banks?
3) Would bank reserves increase, decrease or no change?
4) Will the monetary base increase, decrease or no change?
5) Will the supply of fed funds increase, decrease or no change?
6) Will the fed funds interest rate increase, decrease or no change?
7) Will the yield curve shift up or down?
8) Will longer term interest rates (e.g. 10-year T-Note) increase, decrease or no
change?
9) How are longer term interest rates determined?
10) In response to the change in longer term interest rates, will investment increase,
decrease or no change?
11) Will the growth rate of aggregate demand increase, decrease or no change?
12) Will the growth rate of aggregate supply increase, decrease or no change?