Question

Assigment 4 13,4,6,8 1) What is the Federal Open Market Committee (FOMC)? What does it do? Who is on this committee? 2) What does it mean when we say the FED is a banker's bank? 3) Find the current FED funds target rate. Explain what it is? 4) Using T-Accounts, show how open market operations of the FED adjust banking balance sheets. 5) What does it mean to borrow at the discount window? Why does this possibility exist? 6) Much has been made of the FED's recent policy of quantitative easing. What was this policy? What was it supposed to achieve? 7) Why does the sound operation of the financial sector matter to the business and household sectors? 8) Review the most recent report of the FOMC. In your own words, explain what the committee is saying?

Answer 1

1. FOMC is the branch of fedral reserve board and determines about the monetry policy (e.g- buying or selling of fed), currently this committe contains- 7 members of board of governer of federal reserve system, the president of federal reserve bank of new york, and 4 of remaining 11 reserve bank's president,who serve yearly on rosting basis.
2. Federal Reserve Banks are often called the "bankers' banks" because they supply services to commercial banks almost like the services that commercial banks provide for his or her customers. Federal Reserve System Banks distribute currency and coin to banks, lend money to banks, and process electronic payments.

3. 	this week	month ago	year ago
   fed current target rate (1.00-1.50)	1.25	1.75	2.50

   The rate of interest at which banks and depository institutions (financial institues) lend money to every other, usually on an overnight basis. The law requires banks to stay a particular percentage of their customer's money on reserve, where the banks earn no interest thereon . Consequently, banks attempt to stay as on the brink of the reserve limit as possible without foundering it, lending a refund and forth to take care of the right level.

4. My T-Accout

   assets	liabilites
   cheackable deposits -$100
   currency +$100

   Your Bank

   assets	liabilities
   reserve-$100	cheackable deposites-$100

   central bank (FED)

   assets	liabilities
   	currency in circulation $100
   	reserve -$100

5. The discount window is an term or instrument of monetary policy (usually controlled by financial institutions) that give permissinsto eligible institutions to borrow money from the central bank, usually on a very short-term basis, to meet temporary shortages of liquidity caused by internal or external disterbence.
6. Quantitative easing is an unorthodox monetary policy in which a financial institution purchases government securities or other securities from the market to have an extend to cash supply and encourage lending and investment. When short-term interest rates are at or getting to zero, normal open market operations, which target interest rates, are not any longer effective, so instead a financial institution can target specified amounts of assets to purchase. Quantitative easing increases the money supply by purchasing assets with newly created bank reserves so as to supply banks with more liquidity, and its achievement was to increases the money supply by purchasing assets with newly created bank reserves in order to provide banks with more liquidity.
7. Soundness in finencial market which have banks funds reserve etc. is very importent and all this leds to be very matters to the business and household sectors because,both the terms cannot be run without these aspects of markets like business cannot be run without funds etc so all are corelated to each other.
8. The Fed surprise rate cut shaken the confidence to manage the next crisis. A rate cut of this magnitude after the most bullish day ever on the DJIA is a bad idea. Volatility has returned after the decision.The Federal Reserve has cut interest rates by 50 basis points in a shock move. Markets have leaped on the news that mitigates the coronavirus crisis. The mood may change quickly as the Fed cannot fight the disease.