What is the federal funds rate?   What problems does the FED encounter when trying to control the US money supply?

Q: If Federal Reserve notes and coins are​ $765 billion, and​ banks' reserves at the Fed are​ $8…

A: Banks' reserves, also known as reserve balances, can be defined as the funds held by commercial…

Q: If the Fed sells $100 million of U.S. government securities, what happens to the quantity of money?

A: Open Market Operation:-  To keep the amount of money in circulation under control, the Federal Bank…

Q: What problems will the federal reserve face if people are unemployed and facing inflation?

A: Inflation is defined as the rise in the average price level of commodities and services in the…

Q: The Federal Reserve manages the amount of money in circulation by buying or selling U.S. Treasury…

A: The Federal Reserves is the central bank of the U.S. who is solely responsible for controlling the…

Q: Suppose you have a Canadian quarter in your pocket. How is this money counted in the Fed balance…

A: Balance sheet refers to the financial statement which is reporting the assets, liabilities and…

Q: What are the dangers of increasing the money supply too slowly? Too rapidly?

A: The money supply is a part of the monetary policy, a policy that increases the output and the…

Q: Why does the Federal Reserve not have complete control over the size of the money supply? Give at…

A: Money Supply: - In an economy the total value of money in circulation at a point of time is known as…

Q: What happens after the reduction in the reserve ratio that causes the money supply to increase?

A: Reserve ratio is a particular percentage of reserves that each bank has to keep as reserves out of…

Q: What are the main determinants of the federal funds rate?

A: Federal funds rate is the rate at which commercial banks borrow from and lend to each other.

Q: Banks have a reserve ratio of 20%, and households deposit all cash into the banking system. How many…

A: The money multiplier (Km) depicts the potential increase in the money supply (MS) that can result…

Q: Does the Fed have control over the federal funds rate and over bank reserves? If so, can the Fed…

A: The Fed funds rate is the interest rate U.S. banks charge each other to lend funds overnight.

Q: The U.S. Treasury maintains accounts at commercial banks. What would be the consequences for the…

A: The deposits that a commercial bank receives is a liability that needs to be repaid, that the bank…

Q: Should the Fed be independent or a government agency subordinate to Congress and the president?

A: The Federal Reserve in the U.S was created on 23rd December 1913. It is the central bank of the…

Q: Which of the following is not a function of the Fed? Accepting deposits from banks Making loans to…

A: The Central bank performs all the monetary activities, i.e., the activities relating to money…

Q: To what extent was the Fed being responsible for the housing price bubble of the early 2000s.

A: The housing price bubble of early 2000s further led to subprime crisis which was majorly responsible…

Q: We've learned that the primary focus of the Federal Reserve is interest rates. Why would the Federal…

A: The federal reserve is responsible for controlling not only the interest rate but also the money…

Q: What is the current reserve requirement set by the FED? What does this rate tell you about how the…

A: The reserve ratio required in the banks set by FED is 0% for transactions up to $16.3 million, 3%…

Q: Let’s pretend the economy is in a horrible recession, inflation is rising, and interest rates are…

A: In a hypothetical scenario where the economy is experiencing a severe recession, rising inflation,…

Q: If the banking system has a reserves ratio of 10% and the Fed purchases $528 worth of government…

A: The percentage of reservable liabilities that commercial banks are required to retain rather than…

Q: The Fed must know how much money people want to hold so that it can supply the appropriate amount?

A: The Federal Reserve System that is also known as the Fed is the United States' central bank and…

Q: What are the three tools of the Federal Reserve? Explain how each can be used to increase the money…

A: There are three main tools of the Federal Reserve - Reserve Requirements, Discount rate, and Open…

Q: What is a tool used by the federal open market committee to increase the money suppl

A: Monetary policy and fiscal policies are used by the government in order to maintain stability in the…

Q: How will a (decrease)in the interest rate on excess reserves affect the federal funds rate (increase…

A: An rate of interest is that the quantity of interest due per period , as a proportion of the amount…

Q: What is the major objective of monetary policy in the US economy?

A: Monetary policy, which is set by the nation's central bank, aims to regulate the total amount of…

Q: What role does the federal reserve bank play in conducting monetary policy, fiscal policy, and…

A: Federal Reserve Bank is the Central Bank of the United States, created by the Congress. Federal…

Q: the Fed, and th es loans to Stev k. 2nd National account at 3rd M oply in this econ

A: In the economy, there is a sale of bonds worth $1000 to the Fed. This means the Fed bought the bonds…

Q: Write two to three paragraphs explaining how J. P. Morgan helped the U.S. economy. Your response…

A: Morgan had deep and extremely beneficial connections with the London financial world as a result of…

Q: What effects does the Federal Reserve have on the economy? Select the three correct answers.…

A: The Federal reserve refers to the central bank of United Nations that performs all the functions of…

Q: When the Fed wants to reduce the supply of money circulating in the country, it will sell…

A: Open Market Operations is a tool used by Fed to regulate money supply in the economy. Fed can buy or…

Q: What are the three monetary policy tools that Fed has at its disposal?

A: Monetary policy refers to the central bank’s policy that brings changes in the supply of money by…

Q: Why does the Fed act as a lender of last resort? What is the usual mechanism by which the Fed acts…

A: The primary function of a Fed is to act as a lender of last resort. It means providing…

Q: How does the Federal reserve Bank "influence" interest rates to meet the objectives of the Fed?

A: The first tool that is used by the Fed to meet the objectives is to manipulate short-term interest…

Q: Why should we care about the money supply and what the Federal Reserve is doing?

A: In 2007, the great subprime crisis happened in the US that  was caused by high home prices  and the…

Q: Which tool of the monetary policy is most frequently used by the Fed to change the money supply?

A: Monetary policy refers to the credit-control system used by the central bank of a country to achieve…

Q: describe the actions the Federal Reserve took to maintain a healthy economy during the recent…

A: Fed has done so much to prevent the economy from slowing down during the economic crises as an…

Q: How does adjusting the reserve requirements cause the money supply to expand or contract?

A: Reserve requirement is the percentage to the total deposit of commercial bank that has to keep with…

Q: When Congress established the Federal Reserve in 1913, what was its main responsibility? When did…

A: The Congress created the Federal Reserve in 1913 in an effort to build a better economic system both…

Q: What do you think the Federal Reserve Bank did to the reserve requirement during the 2008–2009 Great…

A: During the great recession, for the faster growth of economy and to create jobs, federal reserve…

Q: Members of the Board of Governors of the Fed are а. elected to two-year terms by the Electoral…

A: The members of the board of governer of the fed are appointed by the United State's President.

Q: Carefully explain how the Federal Reserve (Fed) will use each of the three monetary policy tools at…

A: The monetary authority of a country's policy is to manage either the interest rate charged on very…

Q: The people in an economy have $10 million in money. There is only one bank that all the people…

A: The formula for money multiplier: Money multiplier = 1 / Required Reserve Ratio

Q: What will happen to Vladimir Putin after the war with Ukraine? What kind of consequences will he and…

A: Throughout 2021 and 2022, Russian military development on the boundary of Ukraine has raised…

Q: Which is the most commonly used tool to influence the money supply?

A: Money supply refers to all the currency, coins and liquid cash in an economy at a given time period.…

Q: Controlling the money supply allows the Federal Reserve to a. Influence government spending and…

A: Money supply : Federal government can increase or decrease the supply of money within an economy. It…

Q: Which of the following is the role of the Federal Reserve System? Select one: a. Set the Required…

A: Federal Reserve system is the central bank authority just like the other countries whose function is…

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.