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of the Senate banking committee, Toomey has called on the Fed to adopt a rule which would require it to explain howmonetary policy would be set, as well as explain to Congress any reasons for deviations from the rule. In a 1977amendment to the Federal Reserve Act, Congress has mandated that the Fed act to maintain stable prices, maximizeemployment, and stabilize long-term interest rates.Source: Tom DiChristopher,ʺFed has lost credibility: Senator Toomey,ʺcnbc.com, July 16, 2015.244)Refer to the Article Summary.Senator Pat Toomey brought the Fedʹs credibility into questionwhen it once again delayed raising interest rates despite several prior announcements alluding totiming for a potential interest rate hike. Prior to this, over the past two decades whenever achange in Fed policy had been announced, the change has ________ taken place, leading to________ credibility.A) actually; greaterB) rarely; lessC) actually; lessD) rarely; greater244)Answer: APage Ref: 1003-004/621-622Learning Outcome: Macro-13: Discuss the key measures, theories, and effects of inflation and deflation.58
245)Refer to the Article Summary.If the Federal Reserveʹs announcements about upcoming monetarypolicy decisions arenotseen as credible, as Senator Pat Toomey alludes to regarding the Fedʹschanging projections as to when they would increase interest rates, which of the following wouldyou expect to see?245)Page Ref: 1003/621Learning Outcome: Macro-12: Explain how monetary policy influences interest rates, aggregate demand, realGDP and inflation.246) When a central bank makes joint decisions with the governmentʹs Treasury department,246)Page Ref: 1007-008/625-626Learning Outcome: Macro-13: Discuss the key measures, theories, and effects of inflation and deflation.TRUE/FALSE. WriteʹTʹif the statement is true andʹFʹif the statement is false.247) One problem with deflation is that it can raise the real value of debt.247)Page Ref: 999-1000/617-618Learning Outcome: Macro-13: Discuss the key measures, theories, and effects of inflation and deflation.248) If inflation falls from 11% to 5%, there is deflation.248)Page Ref: 999-1000/617-618Learning Outcome: Macro-13: Discuss the key measures, theories, and effects of inflation and deflation.249) The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and highemployment.249)Answer:TrueFalsePage Ref: 1003/621Learning Outcome: Macro
12: Explain how monetary policy influences interest rates, aggregate demand, real
GDP and inflation.