Give an example of a monetary policy target. Explain why the Fed uses policy targets
What will be an ideal response?
One possible monetary target is the money supply. Another possible target is the interest rate. (Either answer is correct). A monetary policy target is an economic variable that the Fed can affect directly. The Fed uses monetary targets because it cannot directly manipulate and change monetary policy goals such as high employment, economic growth, and price stability. The Fed can affect the targets directly and they in turn affect the variables such as real GDP and the price level, which are closely related to the Fed's policy goals.
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In the United States, where there is a permanent increase in the money supply, exchange rate overshooting is caused in part by:
a. higher domestic interest rates. b. an appreciation of the dollar. c. lower foreign interest rates. d. a depreciation of the dollar.
Jim is planning on attending a football game. He spent $40 on the ticket. He will have to take the day off losing 8 hours of work. His hourly wage is $10 . He estimates it will cost him around $20 for gas and parking at the game. Jim's total economic cost of attending the game equals
a. $80 b. $40 c. $60 d. $140