When the Fed buys bonds in open-market operations, it the money supply. If the Fed wants to decrease the money supply, it can the reserve requirement. When the Fed decreases the interest rate it pays on reserves, the money supply will When the FOMC increases its target for the federal funds rate, the money supply will When Citibank repays a loan it had previously taken from the Fed, it the money supply.

When the Fed buys bonds in open-market operations, it the money supply. If the Fed wants to decrease the money supply, it can the reserve requirement. When the Fed decreases the interest rate it pays on reserves, the money supply will When the FOMC increases its target for the federal funds rate, the money supply will When Citibank repays a loan it had previously taken from the Fed, it the money supply.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The federal funds rate is: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the interest rate that the Federal Reserve charges banks when banks borrow reserves from the Federal Reserve. b the market interest rate that banks pay each other when they borrow reserves from each other. c the interest rate the the Federal Reserve pays on banks' required reserves. d the interest rate that the Federal Reserve pays on banks' excess reserves.
Explanation it correctly
Carefully explain how the Federal Reserve (Fed) will use each of the three monetary policy tools at its disposal to decrease the money supply.
What could thwart the Federal Reserve's effort to expand the money supply and lower interest rates? The federal funds rate declines. Inflation expectations decline. Banks increase their holdings of excess reserves. The supply line for total bank reserves shifts to the right.
In 2019, a Federal reserve publications stated: " The federal reserve can no longer effectively influence the FFR by small changes in the supply of reserves." Is this statement true? 1. No, since the 2007-2009 financial crises, the Fed has fixed the FFR to match the level of reserves held in the banking system. 2. Yes, since the 2007-2009 financial crises, banks have held substantial excess reserves so small changes in reserves by the Fed do not significantly influence the FFR 3. No, the FFR always reacts to the level of reserves, so any changes in reserves by the Fed will impact the FFR 4. Yes, since the 2007-2009 financial crises, banks have stopped holding excess reserves altogether so small changes in reserves have no impact on the FFR
The Fed is both literally and figuratively a money machine. Describe how banks create money.
For a financial system, the reserve ratio is 10% and the Fed decides to buy $5 million worth of bonds from the public. If the public deposits this amount into transactions accounts, what happens to the money supply initially and directly? What is the potential change in lending capacity (money creation) for the banking system?
Suppose the fed were to sell off $500 worth of used office furniture to private citizens. Explain why the money supply and bank reserves would decrease.
The Federal Reserve annual report. Visit the Federal Reserve www.federalreserve.gov, and select "Monetary Policy." Then click on "Reports" and "Monetary Policy Report " to retrieve the current annual report (parts 1 and 2). Summarize the policy actions of the Board of Governors during the most recent period. In the Fed's opinion, how did the U.S. economy perform?
Suppose Federal Reserve wants to reduce money supply. How could Federal Reserve reduce money supply through the open market operations? Show your answers in a diagram. Your diagram should also show interbank loans. To reduce money supply, should Fed increase or decrease Fed funds rate? For the Fed Funds rate, who is a borrower? Who is a lender? For the discount rate, who is a borrower? Who is the lender?
Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required 10.00 %, and the Federal Reserve wants to increase the money supply by $80.00 million, the Fed would need to make a purchase of $ million. (Insert your answer in millions, and round to two decimal places.)
Suppose all banks have zero excess reserves. The Fed buys bonds for $1 million and a bond dealer deposits the check in his or her bank. The required reserve ratio is 8 percent. The bank loans out the maximum it is allowed to a local business. The business writes a check for the full amount for supplies, which is then deposited in another bank. The largest loan the second bank can make is: The largest loan the second bank can make is $. (Round your answer to the nearest dollar.)