https://courses.aplia.com/problemsetassets/macro/Fuller_Katrina/article.html   question  The Federal Reserve (or “the Fed” for short) conducts monetary policy in the United States. That is, the Fed decides how much money to supply to the economy. When the Fed increases the money supply, money becomes more abundant and the costs of borrowing money (that is, interest rates) fall. When the Fed reduces the money supply, money becomes scarce and interest rates rise. According to the Economic Outlook Group, an economic consultancy in New Jersey, higher energy prices resulting from Katrina may lead the Fed to __________ next time it meets.

Federal Reserve Economic Data (FRED), from Federal Reserve Bank of Saint Louis provide the data in the chart below. In addition on Dec 14, 2016- the Federal Funds Rate was 0.41 percent per year, and on Dec 28, 2016 it was 0.66 percent per year. At the current level of the Federal Funds Rate, the Fed is. concerned about inflation 6.0 7.0- 6.0 5.0 4.0 3.0- 2.0 1.0 0.0- Federal funds rate (percent per year) 09/2006 09/2008 09/2010 Year more; than it is about the exchange rate less; than it is about unemployment more; than it is about unemployment less; than it is about government debt 09/2012 09/2014 09/2016

Introduction to Macroeconomics Required Reserves and the Money Multiplier When a bank receives a deposit, it must set aside part of it according to the established reserve requirement. The remaining funds are excess reserves and can be lent out, In our economy of multiple banks, it is very likely that the proceeds of the loan will end up on deposit at another bank. When that happens, the process repeats itself: The bank sets aside required reserves and can lend out its excess reserves. The result is the money multiplier process. Use the table that follows to learn more about this process. The table begins with an initial deposit of $1,000 to one bank and assumes a required reserve ratio of 15%. Assume the amount lent by one bank is always deposited in another. 1. Calculate the amount of required reserves, excess reserves, and lending at each step in the process. The first boxes of the table are filled in to get you started. Continue until you have filled in five rows of numbers. 2. Now…

What are the three instruments of monetary control? Explain. Why does the Federal Reserve prefer to use open market operations? Explain. How can the Federal Reserve use its open market operations to expand or contract the nation’s money and credit supply? Explain in some detail. Describe the workings of the Federal Open market Committee which controls monetary policy. Give a detailed account of how monetary policy works to change interest rates, aggregate demand, and the macroeconomy.