If the Federal Open Market Committee is not allowed to simply declare Interest Rates, what authorities...
If the Federal Open Market Committee is not allowed to simply declare Interest Rates, what authorities do they have? How do these lead to changes in the interest rate you pay?
Make sure to give full and complete answers with support. Explanations should be a minimum of 5-6 sentences each.
Homework Answers
The Federal Open Market Committee does not declare a particular interest rate. However, they can set a target rate and achieve the rate using open market operations. The Federal Open Market Committee can buy or sell government securities in order to control the money supply and interest rate. If it wants to increase the interest rate, it will sell government securities to commercial banks. As a result, money would flow from the banking system to the Fed, the money supply would reduce and the interest rate would go up because of constant money demand. On the other hand, if it wants to decrease the interest rate, it will buy government securities from commercial banks. As a result, money would flow from the Fed to the banking system , the money supply would increase and the interest rate would go down because of constant money demand.
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If the Federal Open Market Committee is not allowed to
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According to the practice of the Federal Reserve, which of the following interest rates is normally...
According to the
practice of the Federal Reserve, which of the following interest
rates is normally the highest one?
a.
A
and B are always equal, and C is always lower.
b.
The
Federal funds rate target
c.
The
rate paid on commercial banks’ deposits of reserves
d.
The
discount rate
Consider the figure above. The economy is
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____.
a.
D
b.
B
c.
C
d.
A
China experiences high
rates...
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