Answered: Use the money demand and money supply…

Use the money demand and money supply model to show graphically and explain the effect on interest rates of the Federal Reserveʹs open market purchase of Treasury securities.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

ChapterD: Bond Prices And The Interest Rate

Section: Chapter Questions

Problem 1QP

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Use the money demand and money supply model to show graphically and explain the effect on interest rates of the Federal Reserveʹs open market purchase of Treasury securities.

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Explain the slopes of the supply and demand curves in the federal funds market. Show and explain how the following events would affect the federal funds rate: The public increases withdrawals from checking and savings accounts The Fed makes open market purchases various types of securities The Fed decreases the discount rate The Fed eliminates reserve requirements The Fed decreases the interest rate paid on reserves and also decreases the ON RRP rate New financial regulations require banks to hold additional liquid and safe assets
Is there only one demand or do I have to label the two demand lines with d1 and d2? Federal funds rate (i) iJOER iONRRP Ꭰ Range in which the Fed see the federal funds rate Reserves At the very bottom, why do checkable deposits show up on the assets for the public?
Examine the motives for holding money according to the Liquidity Preference Theory and their impact on interest rates in the Caribbean.
Which of the following statements is true regarding the situation in the federal funds market illustrated in the graph? % Discount Rate IORB Rate FF Rate Supply Reserves Demand Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. There is an arbitrage opportunity and some banks will borrow reserves in the federal funds market and deposit the reserves in their reserve account at the Fed. Your answer C There is an arbitrage opportunity and some banks will borrow reserves from the Fed's discount window and deposit the reserves in their reserve account at the Fed. There is no arbitrage opportunity because the federal funds rate is less than the interest on reserve balances rate. d There is no arbitrage opportunity because the discount rate is higher than the federal funds rate. Show Submitted Answer Show Correct Answer Check My Answer
Explain the slopes of the supply and demand curves in the federal funds market. Show and explain how the following events would affect the federal funds rate: The public increases withdrawals from checking and savings accounts The Fed makes open market sales of government securities The Fed increases the discount rate without increasing the target federal funds rate The Fed raises reserve requirements The Fed exempts the first $10,000,000 of deposits from reserve requirements The Fed increases the interest rate paid on reserves and also increases the ON RRP rate New financial regulations require banks to hold additional liquid and safe assets The Fed begins to reduce the size of its balance sheet
All of the following statements are true regarding the graph of the federal funds market except: % Discount Rate Supply Reserves Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the discount rate acts as a price ceiling for the federal funds rate. Demand b the supply of reserves is vertical because the Fed determines the quantity of reserves. с a small increase in the supply of reserves by the Fed will not change the rate in the federal funds market. × Your answer the demand for reserves slopes downward in the middle portion because banks decrease their holdings of reserves as the federal funds rate falls.
Please solve part (d) and (e).
Using the supply and demand analysis (i.e., diagrams)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. Please use diagrams a. The economy is surprisingly strong, leading to an increase in the amount of checkable deposits. b. Banks expect an unusually large increase in withdrawals from checking deposit accounts in the future. c. The Fed reduces reserve requirements and then offsets this action by conducting an open market sale of securities. d. The Fed raises the interest rate on reserves above the current equilibrium federal funds rate.
explain and demonstrate graphically the effect of an open market sale on the federal funds rate.
Use the supply and demand analysis of the market for reserves to visually illustrate and explain how the following scenarios may arise in equilibrium: a) An increase in the reserve interest rate increases the interbank rate and makes it equal to the discount rate. *Please use a federal fund rate and reserves diagram like the one in the example below: **EXAMPLE OF DIAGRAM TO USE IS ATTACHED
Commercial banks that go to the discount rate window to borroe funds from the Federal Reserve, may not be able to borrow funds from other bank based on the Fed Funds rate a. needs to pay a penalty rate to borrow from the Federal Reserve b. c. may need that their internal balances and accounts be serutinized by the Federal Reserve All of the above d.
Please see attachment and type out the correct answer ASAP with proper explanation of the each option given within 40 50 minutes .