The Federal Reserve may raise its benchmark interest rate later this month. How is this achieved?...
The Federal Reserve may raise its benchmark interest rate later this month. How is this achieved? Why would they do this? Explain the consequences fully. (Include graphs with your answer)
Homework Answers
The fed can raise by selling securities in open market,or by raising the required reserve ratios.One of the reasons for raising the interest rate is controlling Inflation.High interest rate consequently reduces aggregate demand and hence the price level.
The money supply falls and Ms(money supply curve) and LM curve shifts to the left.Interest rate rises and income falls.As a result the aggregate demand falls and price falls.
Please leave a comment in case of a query.
Add Answer to:
The Federal Reserve may raise its benchmark interest rate later
this month. How is this achieved?...
In 2018, the Federal Reserve, the Central Bank for the U.S., raised the Federal Funds Rate...
In 2018, the Federal Reserve, the Central Bank for the U.S., raised the Federal Funds Rate three times from 1.0% in 2017 to 2.20% in November of 2018. The Fed is likely to continue increasing interest rates in 2019 and 2020. (1) What effect is a higher Federal Funds Rate likely to have on the number of loans banks make, on consumption and on investment? Explain why. (2) Why is the Fed raising interest rates now? Explain how the current...
MINI CASE STUDY The Federal Reserve Is Lauded By Most Observers For Its Quick And Innovative...
MINI CASE STUDY The Federal Reserve Is Lauded By Most Observers For Its Quick And Innovative ... Question: MINI CASE STUDY The Federal Reserve is lauded by most observers for its quick and innovative acti... MINI CASE STUDY The Federal Reserve is lauded by most observers for its quick and innovative actions during any financial crisis and severe recession. Nevertheless, some economists contend that the Fed contributed to the financial crisis by holding the federal funds interest rate too low...
The Federal Reserve pays interest on the reserve deposits banks hold with the Fed. Explain if...
The Federal Reserve pays interest on the reserve deposits banks hold with the Fed. Explain if and how the banks could earn any profit without cost in the following situations by taking advantage of differences in the Discount rate, Federal funds rate and interest paid on reserves. Banks would just borrow/lend each other or from the Fed or hold reserves in their account. -The discount rate is 2.5%, the effective federal funds rate is 2% and the interest paid on...
(i) Explain the difference between the nominal and real interest rate. (ii) How does the Reserve...
(i) Explain the difference between the nominal and real interest rate. (ii) How does the Reserve Bank of Australia control the interest rate? (iii) You hear a news report that output growth and inflation are lower than expected. How do you expect that report to affect market interest rates? Explain why. (iv) The Reserve Bank faces a large recessionary gap. How would you expect it to respond? Explain step by step how its policy change is likely to affect the...
Federal Reserve Chairman Jerome Powell announced the central bank will lower interest rates for the first...
Federal Reserve Chairman Jerome Powell announced the central bank will lower interest rates for the first time since the Great Recession in 2008 to help stave off the possibility of an economic downturn. Federal Reserve Chairman Jerome Powell announced the Fed will lower its target federal funds interest rate by 25 basis points to a range of 2.0% to 2.25%. Powell stated the Fed still viewed the outlook for the U.S. economy as favorable, but the interest rate cut is...
I need two questions answered! 1. Explain how the decision of the Federal Reserve Bank (Fed)...
I need two questions answered! 1. Explain how the decision of the Federal Reserve Bank (Fed) to raise interest rates would be expected to affect each component of the weighted average cost of capital (WACC). What mistakes are commonly made when estimating the WACC, and how do these mistakes arise? 2. In what types of situations would capital budgeting decisions be made solely on the basis of project's net present value (NPV)? Identify potential reasons that might drive higher NPV...
Why does Trump want a lower interest rate, or even zero rate? Many times, Trump blamed the Federal Reserve for rising...
Why does Trump want a lower interest rate, or even zero rate? Many times, Trump blamed the Federal Reserve for rising interest rates. Why does Trump want a lower interest rate, or even zero rate? Why do lenders prefer short-term loans? Though long-term loans will give lenders higher interest rate, why do lenders prefer short-term loans?
If the Federal Reserve takes actions to raise interest rates in the economy, this will most...
If the Federal Reserve takes actions to raise interest rates in the economy, this will most likely affect which of these risks facing businesses in the United States? Interest rate risk Financial risk Tax risk Business risk What must the probabilities of the different states of nature sum to? 0.0 1.0 100.0 -1.0 How is the expected return computed? By multiplying the probability of each state of nature with its return and add them together By multiplying the probability of...
1. List and explain the 3 tools of Federal Reserve Monetary Policy. 2. Explain how the...
1. List and explain the 3 tools of Federal Reserve Monetary Policy. 2. Explain how the Federal Reserve would use expansionary monetary policy to close a recessionary gap. Explain how the money supply, interest rate, investment spending, consumer spending, aggregate demand, real GDP, unemployment, and price level is affected. Illustrate this graphically below
U82 Assignment The Federal Reserve can be a short–term source of funds. Discuss how a bank...
U82 Assignment The Federal Reserve can be a short–term source of funds. Discuss how a bank borrows from the Fed and why a bank would borrow from the Fed. Also discuss how the borrowing interest rate is established and include a description of what this rate (that is charged to banks) is called. Include a discussion about how to determine what that rate is today. ● Summarize the most significant uses of the funds banks obtain; include a description of...
1. List and explain the 3 tools of Federal Reserve Monetary Policy. 2. Explain how the Federal Reserve would use expansionary monetary policy to close a recessionary gap. Explain how the money supply, interest rate, investment spending, consumer spending, aggregate demand, real GDP, unemployment, and price level is affected. Illustrate this graphically below
Most questions answered within 3 hours.
-
Do not neglect the old for the new. The existing business must
not lose priority simply...
asked 18 minutes ago -
Kylie is a single mom with two dependent children,
Tanner, age 7 and Olivia, age 11....
asked 1 hour ago -
Phosphorous + bromine = phosphorous tribromide. If 35.0 g of
bromine are reacted and 27.9 grams...
asked 3 hours ago -
Derive the long wavelength limit of the Planck energy density
distribution
asked 2 hours ago -
Calculate the pH of each of the following solutions.
0.50 M HBr
3.1×10−4 M KOH
4.2×10−5...
asked 6 hours ago -
For the year ended December 31, Depot Max’s cost of merchandise
sold was $85,600. Inventory at the...
asked 6 hours ago -
Week 10 - Professional Memo Assignment
Professional Memo Assignment
Your mission for this week, should you...
asked 6 hours ago -
Write a Python program that stores the data for each
player on the team, and it...
asked 6 hours ago -
In
the last 3 months, mike never knows when he is going to get his
allowance...
asked 7 hours ago -
Is Ca(OH)2 a Bronsted base, Lewis base, or both? Why?
asked 7 hours ago -
1A- Why don’t voters complain about U.S. tariffs on imported
sugar?
Because sugar is only a...
asked 7 hours ago -
Cash Payback Period
Primera Banco is evaluating two capital investment proposals for
a drive-up ATM kiosk,...
asked 7 hours ago