Option 2. Raise the discount rate
Explanation: Discount rate is the rate at which the Fed lends to commercial banks. When the discount rate increases, the interest rate increases in the economy.
If the Fed ultimately wants to raise interest rates in the economy, then it should o...
Which one of these events is MOST likely to raise interest rates in the economy? Select one: a. The Fed buying government bonds through an Open Market Operation b. Prices in the economy falling during an economic depression c. The Fed lowering the Federal Funds Rate d. The Fed raising the Required Reserves Ratio e. National income falling during a recession
. Do you think the Fed should lower interest rates, raise interest rates or maintain interest rates? Explain why you choose your stance on interest rates.
Why would the FED ever want to raise interest rates if it's going to risk increasing unemployment? Why not keep the interrest rate low and just let the economy grow as much as it wants, as fast as it wants?
If the federal reserve wants to stimulate the U.S. economy, it will use open market operations to: A. Buy treasury securities from its dealer network. B. Lower the fed funds rate C. Both of the abov D. None of the above Which of the following statements is true concerning market rates? A. a raising market interest rates generally stimulates the economy B. lowering market interest rates generally slows the economy C. Both of the above D. None of the above...
The Fed controls interest rates to either tighten or loosen the economy. When the Feds are needing to tighten the economy, they will raise the interest rates. When interest rates are changed, it sends a ripple effect through the entire financial market. When interest rates rise, cost of capital and borrowing increase. Consumers will borrow and spend less. This will lead to a slower economy and help to hedge inflation. However, the change in interest rates can affect the market...
5. a. Suppose the Fed decides it wants to raise its target interest rate – the fed funds rate – twenty five basis points (.25 percent). How can the Fed accomplish this? Draw a diagram of how this policy action affects the fed funds market. b. What happens to the money supply (say M1) as a result of this action? Explain. Diagrams are mandatory
Given our current economy, would you recommend that the Fed reduce the money supply and raise interest rates, or expand the money supply and lower interest rates? Please explain.
When it wants to change interest rates, the Federal Reserve (Fed) buys or sells government securities, which is referred to as open market operations. If the Fed wants to decrease interest rates, it should ________ government securities. a. buy n. neither buy or sell c. sell d. decrease the taxes investors pay on their investments
The Fed has recently conducted a number of policies aimed to lower interest rates. In fact, the federal funds rate, in an emergency decision, was decreased to a target range of 0- 0.25% and they are purchasing longer term securities in an attempt to lower other interest rates. Do you expect these changes to cause inflation at this time? Explain why/why not. You should explain what is happening to each component of AD in your answer
Why would the Fed raise interest rates over the last year by 1 percentage point? Given the current trajectory of the economy (national and worldwide), what are some possible consequences if they raise interest rates again? Which do you think is worse for the economy overall, inflation or deflation? Explain your answer.