Midterm 2 Review Guide
Uploaded by
Swapan Kumar SahaMidterm 2 Review Guide
Uploaded by
Swapan Kumar SahaChapter 15: Tools of Monetary Policy
• The Market for Reserves and the Federal Funds Rate
• Demand and Supply in the Market for Reserves
• How Changes in the Tools of Monetary Policy Affect the Federal
Funds Rate
• How the Federal Reserve’s Operating Procedures Limit
Fluctuations in the Federal Funds Rate
o Conventional Monetary
o Interest on Reserves
o Open Market Operations
o Discount Policy
Nonconventional Monetary Policy Tools and Quantitative Easing
Chapter 16: The Conduct of Monetary Policy: Goals, Strategy, and
Tactics
• The Role of a Nominal Anchor
• The Time-Inconsistency Problem
• Other Goals of Monetary Policy
• Should Price Stability Be the Primary Goal of Monetary Policy?
Hierarchical Versus Dual Mandates
• Inflation Targeting
o Advantages of Inflation Targeting
o Disadvantages of Inflation Targeting
• Monetary Policy Strategy from the Global Financial Crisis
• Should Central Banks Try to Stop Asset-Price Bubbles?
• Two Types of Asset-Price Bubbles
• Criteria for Choosing the Policy Instrument Tactics: The Taylor
Rule
Chapter 20: The IS Curve
• Planned Expenditure and Aggregate Demand
o The Components of Aggregate Demand
§ Consumption Expenditure
§ Planned Investment Spending
§ Net Exports
§ Government Purchases and Taxes
• Deriving the IS Curve
• Understanding the IS Curve
o What the IS Curve Tells Us: Intuition
o What the IS Curve Tells Us: Numerical Example
• Factors That Shift the IS Curve
• Autonomous Spending
• Changes in Financial Frictions
• Summary of Factors That Shift the IS Curve
Chapter 21: The Monetary Policy and Aggregate Demand Curves
o The Federal Reserve and Monetary Policy
o The Monetary Policy Curve
o The Taylor Principle: Why the Monetary Policy Curve Has an
Upward Slope
o Shifts in the MP Curve
o Movements Along Versus Shifts In the MP Curve
o Shift in the MP Curve: Autonomous Monetary Easing
o The Aggregate Demand Curve
o Deriving the Aggregate Demand Curve Graphically
o Factors That Shift the Aggregate Demand Curve
o Deriving the Aggregate Demand Curve Algebraically
Chapter 22: Aggregate Demand and Supply Analysis
• Aggregate Demand
o Factors That Shift the Aggregate Demand Curve
• Aggregate Supply
o Long-Run Aggregate Supply Curve
o Short-Run Aggregate Supply Curve
o Price Stickiness and the Short-Run Aggregate Supply Curve
• Shifts in the Aggregate Supply Curves
o Shifts in the Long-Run Aggregate Supply Curve
o Shifts in the Short-Run Aggregate Supply Curve
• Equilibrium in Aggregate Demand and Supply Analysis
o Short-Run Equilibrium
o How the Short-Run Equilibrium Moves to the Long-Run
Equilibrium over Time Self-Correcting Mechanism
• Changes in Equilibrium: Aggregate Demand Shocks
o Application The Volcker Disinflation, 1980–1986
o Application Negative Demand Shocks, 2001–2004
• Changes in Equilibrium: Aggregate Supply (Inflation) Shocks
o Temporary Supply Shocks
§ Application Negative Supply Shocks 1978–1980
o Permanent Supply Shocks and Real Business Cycle Theory
§ Application Positive Supply Shocks, 1995–1999
• Application Negative Supply and Demand Shocks and the 2007–
2009 Financial Crisis
