Exam 15: Tools of Monetary Policy

State whether the following statement is true or false AND explain why: "A decrease in the discount rate will always cause a decrease in the federal reserve funds rate."

Open market purchases ________ reserves and the monetary base thereby ________ the money supply.

The actual execution of open market operations is done at

When the federal funds rate equals the discount rate

The discount rate is kept ________ the federal funds rate because the Fed prefers that

The interest rate on seasonal credit equals

The opportunity cost of holding excess reserves is the federal funds rate

The discount rate is kept ________ the federal funds rate because the Fed prefers that

The Fed prefers that so that

In the market for reserves,if the federal funds rate is between the discount rate and the interest rate paid on excess reserves,a ________ in the reserve requirement ________ the demand for reserves,lowering the federal funds interest rate,everything else held constant.

________ are the most important monetary policy tool because they are the primary determinant of changes in the ________,the main source of fluctuations in the money supply.

Much of the credit for prevention of a financial market meltdown after "Black Monday" (October 19,1987)must be given to the Federal Reserve System and its chairman

State whether the following statement is true or false AND explain why: "An increase in the interest rate paid on excess reserves will always cause an increase in the federal reserve funds rate."

The purpose of the commitment by the Fed to keep the federal funds rate at zero for a long period of time is to

When the Fed wants to raise interest rates after banks have accumulated large amounts of excess reserves,it would

In the market for reserves,if the federal funds rate is above the interest rate paid on excess reserves,an open market sale ________ the supply of reserves causing the federal funds rate to ________,everything else held constant.

When the federal funds rate equals the interest rate paid on excess reserves

Open market sales ________ reserves and the monetary base thereby ________ the money supply.

In the market for reserves,if the federal funds rate is above the interest rate paid on excess reserves,an open market purchase ________ the supply of reserves and causes the federal funds interest rate to ________,everything else held constant.

In the market for reserves,if the federal funds rate is between the discount rate and the interest rate paid on excess reserves,an increase in the reserve requirement ________ the demand for reserves,________ the federal funds rate,everything else held constant.