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- The fed controls reserve requirements. True or falseThe Fed's normalization plan for monetary policy included Multiple Choice O raising the federal funds target rate. raising the interest rate paid on excess reserves. using repos to insure adequate excess reserves in the banking system. raising the reserve ratio on deposits to soak up the excess liquidity in the system.When economists speak of the "zero lower bound problem" that the Fed sometimes faces, what are they referring to? 1. It is when short term interest rates are close to zero meaning the Fed can no longer use changes in interest rates to stimulate the economy 2. It is when economic growth in the economy has reached zero percent and the Fed must use aggressive monetary policy 3. It is when the Fed has sold all the securities on its balance sheet and can no longer impact the money supply using open market operations 4. It is when banks choose to hold no excess reserves, making it impossible for the Fed to lower the discount rate
- The purchase and sale of government securities by the Fed is called federal funds market open market operations money market transactions term auction facility41) The current chairman of the Federal Reserve System is A) Milton Friedman. B) Alan Greenspan. C) President Obama. D) Ben Bernanke. 42) The chairman of the Federal Reserve's Board of Governors A) controls the agenda of the Federal Open Market Committee meetings. B) is the main point of contact between the Fed and the President of the U.S. C) receives frequent background briefings on monetary policy issues from a large staff of economists and technical experts. D) All of the above answers are correct. 43) Most of the day-to-day power in monetary policy decisions lies with A) the President of the United States B) the Senate Banking Committee C) the chairman of the Board of Governors D) large commercial banks 44) On the Fed's balance sheet, assets include A) depository institutions deposits at the Federal Reserve and loans to depository institutions. B) U.S. government securities and loans to depository institutions. C)…When the Fed conducts an open market sale, it leads to a higher level of investment and output in the economy. True False Click to select your answer.
- Reserve increase required by the FED: A)decrease monetary supply B)increase monetary supplyTools of Monetary Policy Problem in Fed Solution Money Supply (increase or decrease) Interest Goal Price Level Real GDP (Price stability Unemployment (increase or employment) decrease) Economy (How do they Rates use the tool?) (increase or decrease) Achieved or Full Open market Inflation operations Sell Bonds Increase Decrease Price stability PL: decrease GDP: decrease U: increase Recession PL: GDP: U: Reserve Inflation Requirement PL: GDP: U: Recession PL: GDP: U: Discount Rate Inflation PL: GDP: U: Recession PL: GDP: U: Inflation PL: GDP: Interest on Reserves U: Recession Decrease Decrease Increase Full Employment PL: increase GDP: increase U: decreasePOLICY PERSPECTIVES Like all human institutions, the Fed makes occasional errors in altering the money supply. Would a constant (fixed) rate of money supply growth eliminate errors
- Monetary policy actions by the Fed areFed Operation Describe the exact mechanism through which increasing reserve requirements affects money supply in the economy. Do the same for decreasing the discount rate.Which of the following is not one of the tools of monetary policy used by the Fed? Changing the discount rate and the federal funds rate Changing the reserve requirement OMO buying and selling securities OMO changing the level of spending. All of the answers are tools of monetary policy.