Exam 4

Ace your homework & exams now with Quizwiz!

When the interest on reserve balances rate is lower than the federal funds rate, how will banks likely responds?

Banks will withdraw from their account at their Federal Reserve Bank and lend the funds in the federal funds market.

Which best describes how interest on reserve balances serves as a reservation rate?

Because interest on reserve balances is a risk-free option, banks should not be willing to lend their funds for less than they can earn on their reserve balances.

Which monetary policy implementation tool is the primary tool the Fed uses to steer the federal funds rate into the FOMC's target range?

Interest on reserve balances

Which best describes how the FOMC conducts monetary policy during an inflationary period to achieve its price stability objective?

It increases the target rate range for the federal funds rate.

Which best describes how the FOMC conducts monetary policy to increase employment during a recession to achieve its maximum employment objective?

Lower the target range for the federal funds rate and simultaneously decrease the interest on reserve balances rate, overnight reverse repurchase agreement offering rate, and discount rate.

Which monetary policy tool is a supplementary tool that sets a floor for the federal funds rate?

Overnight reverse repurchase agreement facility

What role do open market operations play in monetary policy?

The Fed uses open market operations to ensure that the level of reserves remains ample.

Compared to fiscal policy, monetary policy has a much shorter

administrative lag.

A contractionary monetary policy is designed to shift the

aggregate demand curve leftward.

Which of the following is a monetary policy intended to combat a recession?

decrease the federal funds target range to shift the aggregate demand curve rightward

Which monetary policy tool serves as a ceiling for the federal funds rate?

discount rate

The discount rate is the rate that banks pay for loans from

fed

The interest rate that banks charge other banks for loans

federal funds rate

When the FOMC conducts monetary policy, it sets the target range for

federal funds rate

Other things equal, a contractionary monetary policy during a period of demand pull inflation will

increase interest rates, reduce investment, and reduce aggregate demand

Which of the following is a tool of monetary policy?

overnight reverse repurchase agreement facility

What are the Fed's dual mandate goals?

price stability and maximum employment

What is not one of the advantages of monetary policy over fiscal policy?

the lack of any timing lags


Related study sets

Epithelial, Connective, Muscle and Nervous Tissue Analysis Questions

View Set

List and describe the major social criticisms of marketing, pages 498 - 505. In your opinion, which one is the most valid and why?

View Set

ACC 302 Final Exam (Ch. 14, 15, 16, 17, 19, & 20)

View Set

Debt - Money Market Debt : Review Questions

View Set

Maternity Exam 3 Practice Questions

View Set