23.5 Monetary Policy at the Zero Lower Bound 1) When the policy rate hits its lower bound and inflation keeps falling, this portion of the Monetary Policy curve is A) downward sloping. B) upward sloping. C) flat. D) undetermined.
23.5
1) When the policy rate hits its lower bound and inflation keeps falling, this portion of the Monetary Policy curve is
A) downward sloping.
B) upward sloping.
C) flat.
D) undetermined.
2) When the policy rate hits its lower bound and inflation keeps falling, this portion of the aggregate
A) downward sloping.
B) upward sloping.
C) flat.
D) undetermined.
3) When output is below potential and the policy rate has hit the floor of zero, the resulting fall in inflation leads to ________ real interest rates, which ________ output further, which causes inflation to fall further.
A) lower; increase
B) higher; depress
C) higher; increase
D) lower; depress
4) When output is below potential and the policy rate has hit the floor of zero, if policymakers do nothing, output will ________ and inflation will ________.
A) rise; fall
B) fall; fall
C) fall; rise
D) rise; rise
5) The real interest rate for investments reflects not only the short-term real interest rate set by the central bank, but also the financial frictions. When the policy rate has hit the floor of zero, to stimulate the economy at given inflation rates, policymakers can
A) lower the financial frictions.
B) lower the short-term real interest rate.
C) lower both the short-term real interest rate and the financial frictions.
D) lower the policy rate.
6) Liquidity provision and asset purchase may not be enough to stimulate the economy unless the these policy actions are able to
A) lower the real interest rate for investments.
B) lower the short-term real interest rate.
C) raise the policy rate above zero.
D) lower the policy rate.
7) The Fed's quantitative easing is to purchase ________ to affect credit spreads.
A) long-term securities
B) short-term securities
C) both long-term and short-term securities
D) private assets
8) With the policy rate set at zero, the rise in expected inflation will lead to a ________ in the real interest
A) fall; rise
B) fall; fall
C) rise; rise
D) rise; fall
9) With the followings is NOT one of the reasons why quantitative easing in and of itself will not necessarily be stimulative?
A) Most of the resulting increase in the monetary base just flows into holdings of
B) Banks just add to their holdings of excess reserves instead of making loans.
C) The asset purchase program involves only the purchase of short-term government securities.
D) The asset purchase program involves only the purchase of long-term government securities.
10) To promote an economic expansion and an exit from the deflationary environment that the Japanese
A) increasing inflation target.
B) increasing inflation expectations.
C) purchasing long-term bonds.
D) all of the above.
E) none of the above.
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