Exam 15: Tools of Monetary Policy

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 then-chairman

When bad storms slow the check-clearing process,float tends to ________ causing the Fed to initiate defensive open market ________.

The Fed prefers that ________ so that ________.

In the market for reserves,when the federal funds rate is above the interest rate paid on excess reserves,the demand curve for reserves is

If the Fed wants to temporarily inject reserves into the banking system,it will engage in

If float is predicted to decrease because of unseasonably good weather,the manager of the trading desk at the Federal Reserve Bank of New York will likely conduct a ________ open market ________ of securities.

Explain the Fed's three tools of monetary policy and how each is used to change the money supply. Does each tool affect the monetary base or the money multiplier?

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 decreases the demand for reserves,________ the federal funds interest rate,everything else held constant.

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

The Fed can offset the effects of an increase in float by engaging in

At its inception,the Federal Reserve was intended to be

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

Which of the following statements is an example of the Fed's conditional commitment policy?

Suppose,at a given federal funds rate,there is an excess demand for reserves in the federal funds market. If the Fed wants the federal funds rate to stay at that level,then it should undertake an open market ________ of bonds,everything else held constant. If the Fed does nothing,however,the federal funds rate will ________.

Suppose on any given day the prevailing equilibrium federal funds rate is below the Federal Reserve's federal funds target rate. If the Federal Reserve wishes for the federal funds rate to be at their target level,then the appropriate action for the Federal Reserve to take is a ________ open market ________,everything else held constant.

The Federal Reserve will engage in a matched sale-purchase transaction when it wants to ________ reserves ________ in the banking system.

Suppose,at a given federal funds rate,there is an excess supply of reserves in the federal funds market. If the Fed wants the federal funds rate to stay at that level,then it should undertake an open market ________ of bonds,everything else held constant. If the Fed does nothing,however,the federal funds rate will ________.

In the market for reserves,if the federal funds rate is between the discount rate and the interest rate paid on excess reserves,a decline in the reserve requirement ________ the ________ curve of reserves and causes the federal funds interest rate to fall,everything else held constant.

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

The discount rate refers to the interest rate on