Federal funds rate is the interest rate which is charged by the banks from other banks in return of their reserves overnight. Increase in federal funds rate decreases lending among banks and reduces supply of money.
Open market sale would lead to decrease in supply of money and target of Fed achieves.
D) Sale; decrease
, This Question: 1 pt The graph shows the demand curve for reserves in the market...
The graph shows the demand curve for bank reserves, RD The cutrent quarfity of reserves supplied is $20 billion Label it 1 The Fed wants to set the federal funds rate at 4 percent a year Draw a point to show the new equilibrium federal funds rate Label 2 Dau a point on tcts cate when the wanty ofresenes suppied s $2 bilion Dran a supply of seseves curve that achierves the target Labelit To change the federal funds rate...
Federal funds rate (percent per year) The graph shows the demand curve for bank reserves, RD. The current quantity of reserves supplied is $20 billion. 7 Draw a point on the curve that shows the federal funds rate when the quantity of reserves supplied is $20 billion. Label it 1 6- 5- t 4 percent a year The Fed wants to set the federal funds rate Draw a supply of reserves curve that achieves the target. Label it Draw a...
4. Draw a supply-demand diagram for the market for reserves to answer each of the following questions. a. Show the effect on the federal funds rate and the quantity of reserves if the Fed simultaneously increased the reserve requirement and conducted an open market purchase of securities. Would the federal funds rate increase, decrease or would the effect be uncertain? b. Draw a graph showing an increase in the discount rate which increases the federal funds rate.
Question 1 1 pts Suppose that in the market for reserves, the federal funds rate is both, less than the discount rate (iff < id), and above the rate paid on excess reserves (iff > Por). If the Federal Reserve Bank elects to decrease the required reserve ratio, then we would expect the_ curve for reserves to shift and the equilibrium interest rate to . O demand; fall O demand; rise o supply; rise O supply; fall
136) Assuming all else equal, if a bank expects a bank run in the future: 136) A) there will be an upward movement along its demand curve for reserves. B) there will be a downward movement along its demand curve for reserves. C) its demand curve for reserves will shift to the right. D) its demand curve for reserves will shift to the left. 137) Which of the following will NOT cause a shift in the demand curve for reserves?...
What is financial stability? What actions has the Fed taken since 2007 in pursuit of financial stability? Use a graph to illustrate the effects of the Fed's actions. Financial stability is a situation in which ______. A. financial markets and institutions function normally to allocate capital resources and risk B. all stock market indices experience daily positive growth C. the real interest rate is less than 3 percent a year D. the nominal interest rate is less than 5 percent...
6) Draw a supply and demand for reserves graph where there is no discount lending and no interest paid on reserves. Show and explain how the Fed could use open market operations to lower the equilibrium federal funds rate.
8. Federal funds rate targeting Aa Aa In conducting monetary policy, the Federal Open Market Committee (FOMC) targets a Federal funds rate and the Federal Reserve Bank of New York uses open-market operations to achieve and maintain the target rate. Suppose that the following graph shows the demand for Federal funds. Use the orange line (square symbols) to plot the supply of Federal funds (also called "the supply of excess reserves") when the FOMC targets a Federal funds rate of...
AFederal Funds Rate Use the figure and supply and demand analysis of the market for reserves to answer the following question. What would happen to the federal funds rate if it were initially at i and there was a switch from deposits into currency (holding everything else constant)? O A. The federal funds rate would stay at it. ** OB. The federal funds rate would increase to i OC. The federal funds rate would fall to 1 OD. The federal...
Draw a supply-demand diagram for the market for reserves to answer each of the following questions. c. Show the effect of an increase in currency holding by the public on the federal funds rate. d. Draw a graph showing how a one percent increase in the interest rate on reserves (the deposit rate) increases the federal funds rate, but by less than one percent.