Exam 15: Tools of Monetary Policy

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.

The Federal Open Market Committee makes the Fed's decisions on the purchase or sale of government securities,but these purchases or sales are executed by the Federal Reserve Bank of

Everything else held constant,the vertical section of the supply curve of reserves is shortened when the

Everything else held constant,in the market for reserves,when the federal funds rate is 3%,lowering the discount rate from 5% to 4%

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.

The Fed's discount lending is of three types: ________ is the most common category; ________ is given to a limited number of banks in vacation and agricultural areas; ________ is given to banks that have experienced severe liquidity problems.

Open market sales shrink ________ thereby lowering ________.

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

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

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

Everything else held constant,the vertical section of the supply curve of reserves is lengthened when the

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

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

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.

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

Funds held in ________ are subject to reserve requirements.

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 ________.