Outline to the policy choices for contractionary and expansionary   options of the Fed.

Q: Suppose that Federal Reserve increases the money stock by 20%. Create a graph that shows the…

A: The demand side of economic policy is monetary policy, which refers to the measures taken by a…

Q: On March 26, 2020, the Federal Reserve abolished reserve requirements (the required reserve ratio =…

A: Reserve requirements refer to the process of keeping aside a fixed percentage of deposits as…

Q: Describe the open market operation of the Fed.  What open market actions would the Fed take to…

A: Open market operation refers to the selling and buying of government bonds by the central bank. In…

Q: What did the Fed do in 2007 to deal with the underutilization) of the discount rate window

A: The 2007 financial crisis began in earlier years with economical credit and lending of tax standards…

Q: Describe the Fed’s monetary policy actions over the course of the  2020 year and  identify whether…

A: Considering the impacts of COVID-19 on financial action and on dangers to the viewpoint, the FOMC…

Q: Question 6 The central bank can choose to target both the nonborrowed reserves and the interest rate…

A: Money supply and the interest rate are two interdependent variables that can't be controlled…

Q: y functions of the FED include: All that Apply) Hint: There are 4 correct answers. uct monetary…

A: United State's central bank and monetary authority is Federal Reserve System or FED The Fed gives…

Q: What is the key assumption underlying the Fed’s abilityto control the real interest rate?

A: The interest rate is the rate charged by the lender on the asset lent by them or received by…

Q: Suppose the economy is in a boom in which real GDP is greater than potential GDP. T'he rate of…

A: If the real GDP increases the level of a potential GDP (meaning if the output gap is positive), it…

Q: stablishin

A: The Federal Reserve System is the United States of America's central system of banking.It was being…

Q: Suppose the Federal Reserve ("the Fed") shifts to a contractionary monetary policy by selling bonds…

A: Contractionary monetary policy: In an inflationary situation, monetary policy will use to raise the…

Q: Expansionary monetary policy

A: Fed uses expansionary monetary policy to increase money supply, using following tools. 1) Open…

Q: Why is there a lag between the Fed’s actions and the economy’s response?

A: In the behaviour of the Fed and the response of the economy, there is a time lag. The point of touch…

Q: What happens to the money supply when the Fed buys government bonds? According to the theory of…

A: MONEY SUPPLY Money supply refers to the volume of currency regulated in the economy during a period…

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: There was a temporary increase in the price of oil. Why does an increase in price of oil pose a…

A: FED faces a trade-off i.e. dilemma of either lowering the inflation rate or increasing real GDP. FED…

Q: The Fed has an obligation of the "full employment mandate". What is that exactly? How is it…

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

Q: Describe the tools used by the Fed since March 2020, including some new non-traditional tools. What…

A: The economic downturn precipitated by the US coronavirus epidemic led to the closure of numerous…

Q: Explain whether the current policy of the Federal Reserve “expansionary” (accommodative) or…

A: The current policy of the Federal Reserve is expansionary which is also referred to as accommodative…

Q: What is the Fed’s monetary policy instrument and What are the main influence on the FOMC

A: Monetary policy is the use of certain instruments or tools by Fed in order to influence the supply…

Q: How changes in the tools of monetary policy affect the Federal Funds Rate? Do not draw the graphics,…

A: Monetary tools and Federal fund rate: Answer: Required reserve ration is a monetary policy tool it…

Q: Which of the following is not a function of the Fed? 1) Setting reserve requirements for banks. 2)…

A: * ANSWER :-  * The OPTION 2  ( advising Congress on fiscal policy) is correct answer.

Q: What happens when the Fed begins to taper purchases? (a) The supply of bonds increases, price rises…

A: When Fed taper (gradual slowing) purchases it decreases supply of bonds. Now given the demand if…

Q: Managing expectations of the Fed Funds rate in order to achieve lower long- term interest rates is…

A: Monetary Policy refers to the macroeconomic policies through which a country's central bank controls…

Q: “The only way that the Fed can affect the level of borrowed reserves is by adjusting the discount…

A: The Fed can change or alter the discount rate in order to encourage or discourage banks to borrow…

Q: Given the latest data on the state of the U.S. economy, the Fed signals the next increase in the…

A: The central bank of an economy conducts open market operations to regulate the interest rate…

Q: What is the likely outcome if the Fed seeks to maintain a federal funds rate of 0% even when the…

A: The Fed or the central bank of the nation use various monetary tools for the proper functioning of…

Q: Actions by the Fed to fight rising rates of inflation likely will initially: (a) reduce long-term…

A: In an economy, it can be seen that a monetary policy is generally beneficial in the short-run due to…

Q: Can the Fed choose to target both the nonborrowed reserves and the federal funds rate at the same…

A: Non-borrowed reserves are the funds that a financial institution has of its own in cash without…

Q: Comment on the Fed's current monetary policy based on Powell's testimony.

A: The monetary policy is policy which is adopted by the monetary authority (central bank of the…

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.