宏观经济学课后习题答案：Ch 26Monetary Policy.pdf

CHAPTER 26 Monetary Policy 1. Chapter Summary 2. Learning Objectives 3. Chapter Outline Teaching Tips/Topics for Discussion 4. Solved Problems 5. Solutions to Review Questions and Problems and Applications 1. Chapter Summary The actions that a central bank undertakes to achieve monetary policy goals are very crucial for the economy. Monetary policy is the actions that the Federal Reserve takes to manage the money supply and interest rates to pursue its economic objectives. The Fed has set four monetary policy goals that are intended to promote a well-functioning economy: price stability, high employment, economic growth, and stability of financial markets and institutions. There are certain goals that the Fed targets. The Fed’s monetary policy targets are economic variables that it can affect directly and that in turn affect variables such as real GDP and the price level that are closely related to the Fed’s policy goals. The two main monetary policy targets are the money supply and the interest rate. The Fed has most often chosen to use the interest rate as its monetary policy target. The Federal Open Market Committee announces target for the federal funds rate after each meeting. The federal funds rate is the interest rate banks charge each other for overnight loans. To fight recession, the Fed conducts an expansionary policy by increasing the money supply. The increase in the money supply lowers the interest rate. To reduce the inflation rate, the Fed conducts contractionary policy by adjusting the money supply t