Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Question
Chapter 13, Problem 11CQ
To determine
Explain the federal fund’s interest rate and identify the impact, if the Fed lowers the federal funds rate.
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Economics: Private and Public Choice
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- Let’s pretend the economy is in a horrible recession, inflation is rising, and interest rates are sky-high. As the chair of the Fed, what monetary role are you going to take? Why?arrow_forwardThe 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?arrow_forwardThe U.S. Treasury maintains accounts at commercial banks. What would be the consequences for the money supply if the Treasury shifted funds from one of those banks to the Fed?arrow_forward
- Describe the open market operation of the Fed. What open market actions would the Fed take to expand the economy? Explain the mechanics of how this happens.arrow_forwardWhat happens when a bank borrows from the Fed’s “discount window”arrow_forwardWhat specific actions could the Federal Reserve take to decrease the money supply and therefore raise interest rates to enact Contractionary Monetary Policy?arrow_forward
- Why did the Fed switch from increasing Federal Reserve target rates from Dec 2015 to Dec 2018 to reducing interest rates in August 2019?arrow_forwarddescribe the actions the Federal Reserve took to maintain a healthy economy during the recent economic crisis. in your opinion, were the actions necessary? were the Fed’s actions effective?arrow_forwardYou often read in the newspaper that the Fed has just lowered the discount rate. Does this signal that the Fed is moving to a more expansionary monetary policy? Why or why not?arrow_forward
- Why is there a lag between the Fed’s actions and the economy’s response?arrow_forwardList three main tools available to the Fed to change money supply in the economy. If the Fed wanted to decrease money supply in the economy, would the Fed buy or sell securities in the open market?arrow_forwardwhat happens to interest rates and short run real GDP when the federal funds rate increases?arrow_forward
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