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Exam 15: Tools of Monetary Policy

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Question 51

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The European System of Central Banks signals the stance of its monetary policy by setting a target for the

A) federal funds rate.
B) overnight cash rate.
C) lombard rate.
D) reserve rate.

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Question 52

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

A) raise;lowering
B) raise;raising
C) lower;lowering
D) lower;raising

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Question 53

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________ are the most important monetary policy tool because they are the primary determinant of changes in the ________,the main source of fluctuations in the money supply.

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

The primary indicator of the Fed's stance on monetary policy is

When the federal funds rate equals the interest rate paid on excess reserves

In the market for reserves,if the federal funds rate is between the discount rate and the interest rate paid on excess reserves,a decline in the reserve requirement ________ the demand of reserves,________ the federal funds rate,everything else held constant.

Much of the credit for prevention of a financial market meltdown after "Black Monday" (October 19,1987) must be given to the Federal Reserve System and then-chairman

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

The facility that was created in December of 2007 that banks can use to borrow from the Fed that has less of a stigma for banks compared to borrowing from the discount window is 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%

Open market purchases raise the ________ thereby raising the ________.

After 2003,The Federal Reserve usually keeps the discount rate

The interest rate on secondary credit is set ________ basis points ________ the primary credit rate.

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 above the interest rate paid on excess reserves,an open market purchase ________ the ________ of reserves which causes the federal funds rate to fall,everything else held constant.

In the market for reserves,a lower interest rate paid on excess reserves

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

Suppose,at a given federal funds rate,there is an excess demand for reserves in the federal funds market.If the Fed wants the federal funds rate to stay at that level,then it should undertake an open market ________ of bonds,everything else held constant.If the Fed does nothing,however,the federal funds rate will ________.

The Fed is considering eliminating