With the advent of big data and increased computing power, some people have advocated for monetary policy by algorithm. Basically, real time data are fed into a program that then determines monetary policy decisions. What are some potential benefits of this approach? Changes to monetary policy would be perfectly predictable. It would prevent the Fed from engineering potentially inflationary short-term economic booms. It would enable Fed policy to respond flexibly to unforeseen economic developments.

Suppose that the current inflation rate is at 9% and the unemployment rate is 3%. Given this data. what monetary policy action would should the Federal Reserve take? How would this affect the economy, the inflation rate, and the unemployment rate?

What did Friedman and Phelps argue about the effectiveness of monetary policies?     As long as people’s inflation expectations were fixed, an increase in the money supply growth rate could not change output in the short or long run.     If people’s inflation expectations were fixed, in the short run, a decrease in the money supply growth rate could raise output and unemployment.     When the money supply growth rate changed, people would eventually revise their inflation expectations so that any change in unemployment created by an increase in the money supply growth rate would be temporary.     When the money supply growth rate changes, people slowly adjust their inflation expectations; therefore, the unemployment rate changes only in the long run but not in the short run.

Which of the following is NOT one of the factors in the FED "rule" used to determine if Monetary Policy action is required? other factors like world events that may impact the US economy price level and inflation the marginal propensity to consume (MPC) real GDP and its effect on unemployment rates

Which of the following was not proposed as an explanation of why the effectiveness monetary policy was limited during and after the financial crisis of 2007-2009? A) recessions accompanied by financial crises tend to be severe. B) long levels of high unemployment had led to a reduction in the employment to population ratio that would be difficult to reverse. C) the Fed was reluctant to implement nonconventional policies. D) structural changes had taken because important sectors of the economy were deeply affected by the financial crisis. recessions accompanied by financial crises tend to be severe long levels of high unemployment had led to a reduction in the employment to population ratio that would be difficult to reverse. structural changes had occurred because important sectors of the economy were deeply affected by the financial crisis. the Fed was reluctant to implement nonconventional policies.

Changes in the Velocity of Money can weaken the intended impact of Monetary Policy. True or False

Which of the following are objectives that the Federal Reserve tries to achieve when setting monetary policy? Check all that apply Economic growth Price stability Zero inflation Interest rate stability

Suppose that the U.S. economy is at full employment when strong economic growth in Asia increases the demand for U.S.-produced goods and services. How the U.S. price level and real GDP will change in the long run if the Fed takes monetary policy actions that are consistent with its objectives as set out in the Federal Reserve Act of 2000?

Which of the following is considered to be a relatively drastic tool of monetary policy? altering the reserve requirements quantitative easing altering the discount rate reducing the money supply

Milton Friedman, the leader for Monetarism had proposed several important arguments regarding the implementation of Monetary Policy. The arguments were listed as: Proposition 1: Monetary Policy has powerful short-run effects on the real economy. In the long run, however, changes in the money supply have their primary effect on the price level.   Proposition 2: Despite the powerful short-run effect of money on the economy, there is little scope for using Monetary Policy actively to try to smooth business cycle. Proposition 3: Even if there is some scope for using Monetary Policy to smooth business cycles, the Central Bank (the Federal Reserve) cannot be relied on to do so effectively. Proposition 4: The Central Bank (the Federal Reserve) should choose a specific monetary aggregate (such as M1 or M2) and commit itself to making that aggregate grow at a fixed percentage rate, year in and year out.   Keynesians economists’ response to the above propositions with this statement:   “Monetary…