Refer to the figure above. If the economy is at point b, to close the output gap the Federal Reserve can increase the reserve requirement and/or increase the discount rate. increase the reserve requirement and/or decrease the discount rate. decrease the reserve requirement and/or increase the discount rate. decrease the reserve requirement and/or decrease the discount rate.

Refer to the figure above. If the economy is at point b, to close the output gap the Federal Reserve can increase the reserve requirement and/or increase the discount rate. increase the reserve requirement and/or decrease the discount rate. decrease the reserve requirement and/or increase the discount rate. decrease the reserve requirement and/or decrease the discount rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Federal Funds Rale The graph to the right illustrates how the Fed uses discounting to keep the federal funds rate from rising far above the federal funds target. It shows a rightward shift of the demand curve for reserves from R to R. The initial equilibrium is at point 1, where the discount rate (a) is above the federal funds rate, which is equal to its target level, i. The shift moves the equilibrium to point 2, where the federal funds rate equals the discount rate ( =l4). According to this graph, at point 2, borrowed reserves are: !3! A. equal to the distance between B and C. B. equal to the distance between A and B. C. equal to the distance between A and C D. zero.
During a recession, the Fed would use open market operations to A) decrease the required reserve ratio. B) sell loans to banks. C) increase the required reserve ratio. D) buy loans from banks.
The Federal Open Market Committee (FOMC) is one branch of Federal Reserve System responsible for: Group of answer choices Approving discount rate Setting Federal Funds Rate Target Range Recommending Discount rate
Using the supply and demand analysis of the market for reserves, indicate what happens to the federal funds rate, borrowed reserves, and nonborrowed reserves, holding everything else constant, under the following situations. Be sure to fully explain the shifts in reserve demand, reserve supply, and changes in the federal funds rate. Please include a picture of your graphs in the folder below.
Discuss the structure and organization of the U.S. Federal Reserve
To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency, the Federal Reserve could decrease the interest rate it pays on reserves. sell Treasury securities. raise government spending. lower the required reserve ratio.
Suppose the Federal Reserve conducts an open market purchase from a bank for $300 million. Assuming the required reserve ratio is 10%, what would be the effect on the money supply in each of the following situations? If there are many banks, all of which make loans for the full amount of their excess reserves, the money supply will increase by $ million. (Enter your response as a whole number.)
Suppose the reserve ratio is 20% for all banks. If the Fed increases bank reserves by $200, then the money supply will:
The Federal Reserve can expand the money supply through open market operations. The Federal Open Market Committee has determined there is a need for additional liquidity, and they seek to increase the money supply by $153 billion. The reserve ratio for banks is currently 11%. How much should the Federal Reserve buy in treasury securities? Put your answer in billions of dollars and then round to two decimal places.
Assume economic growth is weak, reserves are abundant, and the inflation rate has been below the Fed's price stability goal for a significant period of time. Which of the following would best describe an appropriate policy action? a. Lower the target range for the federal funds rate and use open market operations to increase the level of reserves in the banking system. b. Raise the target range for the federal funds rate while simultaneously decreasing the interest on reserve balances rate, overnight reverse repo rate, and discount rate. c. Lower the target range for the federal funds rate and simultaneously decrease the interest on reserve balances rate, overnight reverse repo rate, and discount rate. d. Raise the target range for the federal funds rate and simultaneously increase the interest on reserve balances rate, overnight reverse repo rate, and discount rate.
28) If the required reserve ratio is 10% and the Federal Reserve purchases $50 million in treasury bonds on the open market, how could the money supply be impacted? a) Increase by a maximum amount of $500 million b) Increase by a maximum amount of $50 million c) Decrease by a maximum amount of $500 million d) Decrease by a maximum amount of $50 million 29) What is the most likely outcome of expansionary monetary policy? a) A decrease in the quantity of money, higher interest rates, and increased aggregate demand. b) An increase in the quantity of money, higher interest rates, and increased aggregate demand. c) A decrease in the quantity of money, lower interest rates, and decreased aggregate demand.. d) An increase in the quantity of money, lower interest rates, and increased aggregate demand.
Following the Great Recession, the Federal Reserve adopted a restrictive reserve policy. true false