6.Fed is split over time of rate rise In October 2009, the Fed was forecasting that unemployment will average 9.8 percent in 2010 and said the federal funds rate will remain "exceptionally low" for "an extended period." But some officials were beginning to worry about unwinding the $2 trillion in special credits that have boosted the monetary base and to wonder if the interest rate might need to start rising soon. Source: The New York Times, October 9, 2009 Describe the time lags in the operation of monetary policy and explain why they pose a challenge for the Fed in deciding when to start raising the federal funds rate target in a recession. The time lag between the implementation of monetary policy and the resulting change in the inflation rate is approximately This poses a challenge for the Fed in deciding when to start raising the federal funds rate target in a recession because_ А. 1 year; if the Fed raises the federal funds rate too soon, it Quld lengtben the

6.Fed is split over time of rate rise In October 2009, the Fed was forecasting that unemployment will average 9.8 percent in 2010 and said the federal funds rate will remain "exceptionally low" for "an extended period." But some officials were beginning to worry about unwinding the $2 trillion in special credits that have boosted the monetary base and to wonder if the interest rate might need to start rising soon. Source: The New York Times, October 9, 2009 Describe the time lags in the operation of monetary policy and explain why they pose a challenge for the Fed in deciding when to start raising the federal funds rate target in a recession. The time lag between the implementation of monetary policy and the resulting change in the inflation rate is approximately This poses a challenge for the Fed in deciding when to start raising the federal funds rate target in a recession because_ А. 1 year; if the Fed raises the federal funds rate too soon, it Quld lengtben the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What is the tradeoff that the Fed faces in the short run? In the short run, the Fed faces a tradeoff between ________. A. the nominal interest rate and the real interest rate B. monetary aggregates and credit aggregates C. short-term interest rates and long-term interest rates D. inflation and unemployment
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.
In July 2020, an article on reuters.com noted that: “The Fed’s total balance sheet size rose .... It was largely due to continued purchases of Treasuries and mortgage-backed securities aimed at keeping financial market conditions easy.” Why would the Fed’s buying Treasury securities and mortgage-backed securities keep “financial market conditions easy”? Why would these asset purchases cause the Fed’s balance sheet to rise? Did the Fed’s asset purchases also cause the monetary base to rise? Explain based on the graph in Question 2.
The Federal Reserve system is a debt-based financial system because when money comes into existence in the banking system, more debt is created with each dollar as more interest is owed to the banking system which drains wealth from American people, transferring it to the banking system because the amount of debt to be paid back is always larger than the amount of money created when the loan issued. . hundreds of billions of dollars in interest is made off U.S. government debt each year as money that belongs to U.S. taxpayers is transferred to the U.S. government, which in turn is transferred to wealthy international bankers, the IMF, and other foreign governments. the Fed gives interest-free money to the big banks, which in turn lend it back to the U.S. the Federal Reserve bank of New York dominates Wall Street and is used as a tool of global banks that require people to spend their lives paying off debts to that profit the bankers. All of the answers are correct.
Match the correct policy with its description. Column A 1. 2. 3. 4. During a contraction or recession, the government can do two things: Decrease Taxes Or Increase Spending During a period of excessive inflation (during a period of expansion), the government can do two things: Increase Taxes Or Decrease Spending Increased lending by banks to customers (increased money supply) Lower Interest Rates on loans and bank accounts Increased borrowing from the Fed by banks Decreased lending by banks to customers (decreased money supply) Higher Interest Rates on loans and bank accounts Decreased borrowing from the Fed by banks % 5 M Column B a. Expansionary Fiscal Policy b. Contractionary Monetary Policy c. Contractionary Fiscal Policy d. Expansionary Monetary Policy
In which of the following situations is the Fed most likely to raise the federal funds rate target? The Fed is most likely to raise the federal funds rate target when the Fed expects _______. A. high unemployment and a recessionary gap B. high long-term interest rates and a recessionary gap C. low unemployment and an inflationary gap D. banks to hold ample reserves and charge low interest rates on loans thank ss !
The Fed is most likely to raise the federal funds rate target when the Fed expects _______. A. high unemployment and a recessionary gap B. high long-term interest rates and a recessionary gap C. low unemployment and an inflationary gap D. banks to hold ample reserves and charge low interest rates on loans
5 3 2 MD 1 100 200 300 400 500 600 Real money (billions of 2005 yuks) The figure above shows the demand for money in Kiteland. a. If the Kiteland Central Bank has set the quantity of money so that the equilibrium interest rate is 4 percent, draw the supply of money curve. b. Suppose that Kiteland's Central Bank wants to raise the interest rate by 1 percentage point. By how much must it change the quantity of real money? c. In order to change the quantity of money to raise the interest rate by one percentage point, if the Central Bank uses an open market operation, does it make an open market purchase or an open market sale? Explain your answer. Inferest rate (percent per yen)
economic Illustrate each of the following situations with a graph showing the IS curve and the Fed rule, and explain what happens to the equilibrium values of the interest rate and output: a. An increase in G with the money supply held constant by the fed b. A decrease in Z with no change in Government soending PLEASE SHOW GRAPH
If the fed decides to buy T bills it increases the the demand for T bills. How will this affect the price of T bills in interest rates
13. (Question 6 on p.347) Explain the links between changes in the nation's money supply, the interest rate, investment spending, aggregate demand, and real GDP (and the price level). A change in the nation's money supply (achieved by changing reserves in the banking system) will cause an opposite change in the interest rate. A reduction in the money supply will make funds increasingly ( scarce, abundant ) and drive (up, down) their price (interest rate). The interest rate and investment spending are also ( directly, inversely) related. A rising interest rate will make some investments (capital spending projects) unprofitable, so spending on those will (increase, decline ). Investment spending is part of aggregate demand, so they will move together, as will real GDP. A decline in spending (AD) will (increase, reduce ) inflationary pressure (and will ( increase, reduce ) prices if they are downwardly flexible).
The Federal Funds Rate is: A. A short-term nominal interest rate B. A short-term real interest rate C. A long-term nominal interest rate D. A long-term real interest rate