Exam 15: Tools of Monetary Policy

Explain dynamic and defensive open market operations. What is the purpose of each type? Describe two situations when defensive open market operations are used. How are defensive open market operations typically conducted?

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

When good weather speeds the check-clearing process,float tends to ________ causing the Fed to initiate ________ open market ________.

Everything else held constant,in the market for reserves,when the federal funds rate is 3%,raising the discount rate from 5% to 6%

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

The two types of open market operations are

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.

When the European System of Central Banks uses long-term refinancing operations,it is similar to the Federal Reserve using

Everything else held constant,in the market for reserves,increases in the discount rate affect the federal funds rate

After 2003,The Federal Reserve usually keeps the discount rate

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."

Open market sales shrink ________ thereby lowering ________.

The Fed's open market operations normally involve only the purchase of government securities,particularly those that are short-term. However,during the crisis,the Fed started new programs to purchase

If the Fed expects currency holdings to rise,it conducts open market ________ to offset the expected ________ in reserves.

A financial panic was averted in October 1987 following "Black Monday" when the Fed announced that

In the market for reserves,when the federal funds interest rate is below the discount rate,the supply curve of reserves is

Everything else held constant,in the market for reserves,when the demand for federal funds intersects the reserve supply curve along the horizontal section,increasing the discount rate

Everything else held constant,in the market for reserves,when the federal funds rate equals the discount rate,lowering the discount rate

If Treasury deposits at the Fed are predicted to ________,the manager of the trading desk at the New York Fed bank will likely conduct ________ open market operations to ________ reserves.

There are two types of open market operations: ________ open market operations are intended to change the level of reserves and the monetary base,and ________ open market operations are intended to offset movements in other factors that affect the monetary base.