Explain the effect on the demand for reserves or the supply of reserves of the following...
Explain the effect on the demand for reserves or the supply of reserves of the following Fed policy action:
an open market sale of government securities
a. this would decrease the demand for reserves
b. this would increase the supply for reserves
c. this would decrease the supply for reserves
d. this would lower the interest rate at which the supply for reserves becomes horizontal
Homework Answers
An open market sale of government securities by Fed will lead to decrease in liquidity in hand of commercial banks since they will buy securities in lieu of cash Hence, this would also decrease supply for reserves on account of decrease in money supply Hence, option (c) is correct
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Explain the effect on the demand for reserves or the supply of
reserves of the following...
4. Draw a supply-demand diagram for the market for reserves to answer each of the following...
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.
6) Draw a supply and demand for reserves graph where there is no discount lending and...
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.
Which of the following is an example of an expansionary fiscal policy? a. The US government increasing corporate taxes b...
Which of the following is an example of an expansionary fiscal policy? a. The US government increasing corporate taxes b. The US government lowering spending in order to balance the budget c. The US government lowering corporate and individual taxes d. The Fed lowering interest rates Which of the following is an example of contractionary monetary policy? a. The Fed conducting open market purchase b. The Fed conducting open market sale c. The US government increases taxes d. The Fed...
Suppose the Fed wanted to engage in an expansionary monetary policy. Which of the following should...
Suppose the Fed wanted to engage in an expansionary monetary policy. Which of the following should it do? a. Increase the reserve requirement ratio. b. Buy bonds on the open market. c. Sell bonds on the open market. d. Lower taxes. e. Increase the discount rate. The interest rate at which banks can borrow funds from the Fed is known as… a. the federal funds rate. b. the discount rate. c. the prime rate. d. the real interest rate. e....
12. If the inflation rate tends to go up, then which of the following is the...
12. If the inflation rate tends to go up, then which of the following is the appropriate monetary policy that the Fed should conduct? a. Open market sale which will increase interest rates and decrease money supply b. Open market purchase which will increase interest rates and decrease money supply c. Open market purchase which will decrease interest rates and increase money supply. d. Open market sale which sale which will decrease interest rates and increase money supply
(a) Why is the interbank lending market often called market for reserves? Explain, with the help of a supply/demand...
(a) Why is the interbank lending market often called market for reserves? Explain, with the help of a supply/demand diagram, how the equilibrium interbank rate is determined. How are the Central bank's lending rate and the rate paid on banks reserves reflected in your diagram? (30 Marks) b) The Central bank wishes to lower market interest rates- will it buy or sell bonds in the open market to meet this target? Use the relevant market equilibrium framework in your answer....
Draw a supply-demand diagram for the market for reserves to answer each of the following questions....
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.
, This Question: 1 pt The graph shows the demand curve for reserves in the market...
,
This Question: 1 pt The graph shows the demand curve for reserves in the market for bank reserves The federal funds target rate is 4 percent Draw the supply of reserves curve determined by the Fed to achieve the federal funds target rate Label it Draw a point at the equilibrium in the market for bank reserves If the Fed raises the Federal funds rate target they undertake an open market O A. purchase, increase O B. sale increase...
Suppose the Fed has decided to lower the Interest rate pald on excess reserves. The goal...
Suppose the Fed has decided to lower the Interest rate pald on excess reserves. The goal of this policy is to O decrease Investment and aggregate demand. increase investment and aggregate demand. O decrease investment and aggregate supply. increase investment and aggregate supply.
What happens after the Fed buys securities on the open market (assume the demand for reserves...
What happens after the Fed buys securities on the open market (assume the demand for reserves is downward sloping)? A. Supply of reserves shifts leftward and federal funds rate increases B. Supply of reserves shifts rightward and federal funds rate declines C. Supply of reserves shifts leftward and federal funds rate declines D. Supply of reserves shifts rightward and federal funds rate increases
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.
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.
(a) Why is the interbank lending market often called market for reserves? Explain, with the help of a supply/demand diagram, how the equilibrium interbank rate is determined. How are the Central bank's lending rate and the rate paid on banks reserves reflected in your diagram? (30 Marks) b) The Central bank wishes to lower market interest rates- will it buy or sell bonds in the open market to meet this target? Use the relevant market equilibrium framework in your answer....
,
This Question: 1 pt The graph shows the demand curve for reserves in the market for bank reserves The federal funds target rate is 4 percent Draw the supply of reserves curve determined by the Fed to achieve the federal funds target rate Label it Draw a point at the equilibrium in the market for bank reserves If the Fed raises the Federal funds rate target they undertake an open market O A. purchase, increase O B. sale increase...
Suppose the Fed has decided to lower the Interest rate pald on excess reserves. The goal of this policy is to O decrease Investment and aggregate demand. increase investment and aggregate demand. O decrease investment and aggregate supply. increase investment and aggregate supply.
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