Question Details

Which of the following should both lead one to expect an increase the price of Treasurys 



“By raising and lowering short-term interest rates to keep inflation moving at a steady pace, many central bankers and academics thought they had finally found a monetary policy solution to conquer the booms and busts of the business cycle.” The next two questions are based on this clip. 
1. This monetary policy is described as 
a)	fixing the rate of growth of the money supply 
b)	targeting on the inflation rate 
c)	fixing the interest rate 
d)	accommodation 

2. By following this policy interest rates would be 
a)	lowered in a boom and lowered in a recession 
b)	lowered in a boom and raised in a recession 
c)	raised in a boom and lowered in a recession 
d)	raised in a boom and raised in a recession 

3. “Analysts said there is little reason for Treasurys to break out of recent ranges until there are clearer signs that either growth is slowing or inflation is picking up.” Which of the following should both lead one to expect an increase the price of Treasurys ? 
a)	slower growth and higher inflation 
b)	slower growth and lower inflation 
c)	higher growth and higher inflation 
d)	higher growth and lower inflation 

4. “The Fed took a somewhat more hawkish view of inflation than it did in the March statement. Today- statement made specific reference to inflationary pressures, saying that energy and other commodity prices have increased, an acknowledgement absent from the March statement.” This statement suggests that the Fed will move to a 
a)	tighter monetary policy, raising interest rates 
b)	tighter monetary policy, lowering interest rates 
c)	easier monetary policy, raising interest rates 
d)	easier monetary policy, lowering interest rates 

5. “This suggests a shift in the FOMCs assessment away from concern over economic growth towards concern over inflation.” This statement suggests that the Fed will move to a 
a)	tighter monetary policy, raising interest rates 
b)	tighter monetary policy, lowering interest rates 
c)	easier monetary policy, raising interest rates 
d)	easier monetary policy, lowering interest rates 

6. Subtle changes in the wording of the FOMCs statement suggest that the Fed is 81 
becoming more hawkish on inflation and so is probably near the end of its cycle of ……..” This statement is best completed by 
	a)tax increases b) tax cuts c) interest rate increases d) interest rate cuts 



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