11. Which policy tool involves the federal reserve setting a short-term interest rate to lend directly to financial institutions? a. The fed funds rate b. The discount rate c. The interest rate paid on excess reserves d. The rate of required reserves 12. Suppose the federal reserve announces a policy of purchasing short-term bonds from the financial system. This policy is an example of a. Expansionary monetary policy through open market operations designed to decrease the federal funds rate b. Contractionary monetary policy through open market operations designed to increase the federal funds rate

11. Which policy tool involves the federal reserve setting a short-term interest rate to lend directly to financial institutions? a. The fed funds rate b. The discount rate c. The interest rate paid on excess reserves d. The rate of required reserves 12. Suppose the federal reserve announces a policy of purchasing short-term bonds from the financial system. This policy is an example of a. Expansionary monetary policy through open market operations designed to decrease the federal funds rate b. Contractionary monetary policy through open market operations designed to increase the federal funds rate

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

1. Explain how to the Central Bank can reduce the money supply with open market operations. Show the impact of this contractionary monetary policy on the interest rate and discuss the implications to the economy. 2. Suppose the economy is in a recession with high unemployment. a. Identify a monetary policy that would restore the economy to its natural rate of employment and steady-state equilibrium output levels. Draw a graph of the money market to illustrate the effect of this monetary policy. Show the resulting change in the interest rate and discuss the implications. b. Identify a fiscal policy that would restore the economy to its natural rate of employment. Discuss the drawbacks and the benefits of this policy.
Q1 a. List the three main tools of monetary policy used by the Fed and briefly describe how each of the tools impacts the money supply and interest rates. b. Give examples of both restrictive and easy monetary policy.
The graph shows the demand curve for bank reserves, RD. On the graph, draw a point to show the discount rate. Label it 1. Draw a point to show the interest on reserves rate. Label it 2. Think about the Fed's monetary policy prior to the Great Recession. Draw the Fed's supply of reserves curve if the Fed set the federal funds rate target at 2 percent a year and hit it. >>> Draw only the objects specified in the question. Federal funds rate (percent per year) 4.0 3.5- 3.0- 2.5- 2.0- 1.5- 1.0- 0.5- 0.0+ 0.0 0.5 1.0 1.5 2.0 Reserves on deposit at Fed ($billions) B Select Line Point 2.5 RD 3.0
The Fed achieves its federal funds rate target _______. A. level by setting the discount rate and the interest on reserves rate B. range because whatever the supply of reserves, the rate is between the discount rate and the interest on reserves rate C. level by conducting daily open market operations D. range by setting the supply of reserves equal to the quantity of reserves demanded at the range midpoint
6) What are the three monetary policy tools of the Fed? Briefly describe how each tool can be used to implement an expansionary monetary policy and a contractionary monetary policy.
17. Match the following scenarios to whether they refer to an expansionary or contractionary monetary policy: A. Fed changes the discount rate from 4.5% to 1% B. Fed changes the discount rate from 4.5% to 5.5% 1. Contractionary 2. Expansionary
Ab 23 Economics
M7
6. An economy is facing a recessionary gap and the Federal Reserve decides to engage in expansionary monetary policy. What are the three tools that the Federal Reserve can use to get the money supply to grow and what direction should each take?
2. Outline the three monetary policy instruments the fed can implement if its objective is to cool off an economy suffering from high inflation.
1. Which do you think would be more harmful to the economy—an inflation rate that averages 5 percent a year that has a high standard deviation or an inflation rate of 7 percent that has a standard deviation close to zero? 2. Suppose a major bank needs to borrow $20 billion overnight that it cannot obtain from private creditors. The Fed is willing to make a discount loan of $20 billion provided that it will not alter the aggregate supply of reserves to the banking system. How can it do so?
What are the three instruments of monetary control? Explain. Why does the Federal Reserve prefer to use open market operations? Explain. How can the Federal Reserve use its open market operations to expand or contract the nation’s money and credit supply? Explain in some detail. Describe the workings of the Federal Open market Committee which controls monetary policy. Give a detailed account of how monetary policy works to change interest rates, aggregate demand, and the macroeconomy.