ENGR.ECONOMIC ANALYSIS
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ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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1a.Name 2 or more tools that the Fed uses in conducting
b.Describe how / why the Fed might use one of these tools.
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- 1. What is Central Bank Independence(CBI)? What is the difference between political and operational independence? 2. Why do you expect the relationship between CBI and inflation to differ between the federal reserve and the central banks for the CFA?arrow_forward7. The four major instruments (or tools) of monetary policy are: 1) Open market operations 2) The Discount Rate 3) The reserve ratio 4) Interest on Reserves The Fed uses four major tools to control the reserves of banks and the size of the money supply. 1) The Federal Reserve can buy or sell government securities in the open market to change the lending ability of the banking system: (a) buying government securities in the open market from either banks or the public ( increases, decreases ) the excess reserves of banks; (b) selling government securities in the open market to either banks or the public ( increases, decreases ) the excess reserves of banks. 2) The Fed can raise or lower the reserve ratio: (a) raising the reserve ratio ( increases, decreases ) the excess reserves of banks and the size of the monetary (checkable-deposit) multiplier; (b) lowering the reserve ratio (increases, decreases) the excess reserves of banks and the size of the monetary multiplier. 3) The Fed can…arrow_forward9. In order to reduce the money supply, a central bank can: A. raise the reserve requirement. B. buy bonds in open market operations. C. lower the discount rate. D. engage in quantitative easing.arrow_forward
- 40. If the Fed pursues expansionary monetary policy then Group of answer choices the money supply will increase, interest rates will fall and GDP will rise the money supply will decrease, interest rates will rise and GDP will fall. the money supply will decrease, interest rates will rise and GDP will fall. the money supply will increase, interest rates will rise and GDP will rise.arrow_forwardFederal funds are short-term loans made by the Federal Reserve to government agencies such as Fannie Mae and Freddie Mac. A True B) Falsearrow_forward25. Suppose the Fed conducts an open market sale. We can expect this transaction to A) reduce the money supply, increase bond prices, and lower interest rates. B) increase the money supply, lower bond prices, and lower interest rates. C) increase the money supply, raise bond prices, and lower interest rates. D) reduce the money supply, reduce bond prices, and increase interest rates. 26. If the economy experiences an inflationary gap, a contractionary monetary policy will A) increase real GDP and increase the price level. B) increase real GDP and decrease the price level. C) decrease real GDP and increase the price level. D) decrease real GDP and decrease the price level. 27. Suppose the economy experiences a recessionary gap. Expansionary monetary policy will A) increase interest rates and increase the bond prices. B) increase interest rates and decrease…arrow_forward
- 12. The primary case against keeping an independent Fed is? A. Prevent the development of an independent business cycle B. Lessen the Role of academic economists in running the country C. Allow the integration of monetary and Fiscal policy D. Introduce people with political now how into the decision making processarrow_forwardOnly typed answer and please don't use chatgptarrow_forwardWith respect to controlling the money supply,the law requires the Fed to take orders from a)the president. b)the Speaker of the House. c.the Secretary of the Treasury. d.no one-the Fed is an independent agency.arrow_forward
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