Exam 15: Tools of Monetary Policy

Open market sales shrink ________ thereby lowering ________.

Everything else held constant,in the market for reserves,when the federal funds rate is 3%,lowering the interest rate paid on excess reserves rate from 2% to 1%

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 Federal Reserve will engage in a repurchase agreement when it wants to ________ reserves ________ in the banking system.

Everything else held constant,in the market for reserves,when the federal funds rate is 5%,lowering the discount rate from 5% to 4%

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

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

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 ________.

The Fed's lender-of-last-resort function

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.

The interest rate for primary credit is usually set ________ basis points ________ the federal funds rate.In March 2008,this gap was changed to ________ basis points.

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.

The quantity of reserves supplied equals

At its inception,the Federal Reserve was intended to be

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

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."

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.

Discount policy affects the money supply by affecting the volume of ________ and the ________.

Everything else held constant,in the market for reserves,decreases in the interest rate paid on excess reserves affect the federal funds rate

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