Question Details

What action would the Fed take if price increases did not slow 



1. “The main reason the U.S. experienced very little inflation in the late 90s, despite full employment and low interest rates, was because …….” This clipping is best completed by 
a)	of good fiscal policy 
b)	of a tight monetary policy 
c)	of high productivity growth 
d)	weak labor unions 

2. “Canada- unemployment rate fell to its lowest level in 30 years in October, fuelling fears of …….. and adding to the pressure for ……… from the Bank of Canada.” The missing parts of this clipping are best filled by 
a)	inflation; higher money growth 
b)	inflation; higher interest rates 
c)	a recession; higher money growth 
d)	a recession; higher interest rates 

3. “Federal Reserve chairman Ben Bernanke said inflation should ease later this year and in 2009, while warning that policy makers will act if price increases don’t slow over the ‘medium term’” What action would the Fed take if price increases did not slow ? 
a)	decrease the required reserve ratio 
b)	increase interest rates 
c)	increase the money supply 
d)	raise taxes 

4. “Softer commodity prices, a firmer greenback, and weak demand will likely drive inflation lower in the months ahead. This opens the door a crack for renewed Fed easing if the economy takes a turn for the worse.” What has inflation got to do with this? Lower inflation means that the Fed can 
	stimulate without provoking inflation 
	attack recession by increasing inflation 
	decrease the money supply without harming the economy 
	lower real interest rates by raising nominal interest rates 

5. “U.S. consumer price inflation is receding, a development that gives the Federal Reserve additional leeway to ________ in the weeks ahead should it be needed, a likely scenario.” The blank is best filled by 
	lower taxes 
	decrease the budget deficit 
	lower interest rates 
	decrease the money supply 




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