Monetary policy & AD-AS

Monetary policy & AD-AS

1. 1. An expansionary monetary policy (the Fed lowering its FFR target) shifts which curve in which direction in the short-run AD-AS model?

   AD shifts rightAD shifts leftSRAS shifts rightSRAS shifts left

2. 2. Which Fed tool sets a floor on short-term rates in the post-QE era?

   Open-market operationsReserve requirementsInterest on reserve balances (IORB)Discount-window lending

3. 3. Which of the following were tools the Fed used at the zero lower bound in 2008-2014?

   Quantitative easing (large-scale asset purchases)Negative interest on reservesForward guidanceSpecial lending facilities (TAF, PDCF, etc.)

4. 4. Imagine inflation is well above the Fed's 2% target and unemployment is right at the natural rate. Which way would you expect the Fed to move its policy rate, and what would happen to the AD curve in the short run?

   Cut rates; AD shifts rightRaise rates; AD shifts leftHold rates; AD doesn't moveRaise rates; AD shifts right