Exam 15: Tools of Monetary Policy

If the banking system has a large amount of reserves,many banks will have excess reserves to lend and the federal funds rate will probably ________;if the level of reserves is low,few banks will have excess reserves to lend and the federal funds rate will probably ________.

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.

Suppose on any given day the prevailing equilibrium federal funds rate is above 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.