Chapter 13 Section 2: Monetary Policy
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I. Two Type of Monetary Policy
1. Monetary policy deals with the changes in the ____ supply *
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2. The objective of ____ monetary policy is to ____ total spending in the economy in order to reduce the unemployment rate *
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2. The objective of ____ monetary policy is to ____ total spending in the economy in order to reduce inflation *
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II. Expansionary Monetary Policy and the Problem of Unemployment
1. The Fed _____ the money supply. *
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2. A(n) _____ money supply is usually associated with ____ total spending in the economy *
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3. As a result of the ____ in spending in the economy, firms begin to sell ____ products *
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4. As firms sell ____ products, they have to hire _______ workers *
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5. If the firm has to hire more workers this ____ the unemployment rate *
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6. The issue of ____ ____does not arise with monetary policy *
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III. Contractionary Monetary Policy and the Problem of Inflation
1. The Fed ___ the monetary supply *
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2. A(n) _____ money supply is usually associated with ____ total spending in the economy *
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3. As a result of the ____ in spending in the economy, firms begin to sell ____ *
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4. As firms sell ____ products, their inventories ____ *
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5. To get rid of surplus goods, firms ___ prices. *
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IV. Monetary Policy and the Exchange Equation
1. Some economists say that the objective of _____ policy is to maintain a stable ____ *
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2. The _____ _____, M X V = P X Q, can be written as (see below) *
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3. By rearranging the exchange equation, we can find out how to calculate the percentage change in the _____ supply *
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4. Some economists say that monetary policy should raise the ____ so that the ___ does not change. *
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5. The Fed should compute the average annual percentage change in V and in Q, set the percentage change in P equal to ____, and calculate the percentage change in M. *
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