Week 4 - Discussion Forum 2

A problem that the Fed faces when it attempts to control the money supply is that the Fed can only control excess reserves but not total reserves.   the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.   the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.   the Fed does not control the amount of money that households choose to hold as deposits in banks.

The Federal Reserve manages the amount of money in circulation by buying or selling U.S. Treasury securities, usually Treasury bills. The increase or decrease of money in circulation helps the Fed to control inflation or deflation. This has an effect on your disposable income. Research the Federal Reserve system and money supply, then answer the following questions. Under what conditions would the Fed choose to decrease the money supply, how would it do so, and what is the goal of doing so? How does the Fed factor inflation into its actions?

Congress established the Federal Reserve System in 1914. Up to this point, the United States did not have a national currency; Federal Reserve notes are still the paper currency in circulation today. Earlier attempts at establishing a central bank were opposed on the grounds that a central bank would give the federal government monopoly over money. This was a reflection of the historic debate between maintaining states’ rights versus establishing a strong centralized authority in the United States. That is, the creation of the Fed and a national currency would mean that states would no longer have the authority to control the money supply on a regional level. Discuss the debate between states’ rights versus centralized authority in the context of the Economic and Monetary Union and the European Central Bank.  

What steps can the Federal Reserve take to increase the money supply? a) The Federal Reserve can reduce personal income tax rates to encourage households to spend more money b) The Federal Reserve can require all banks to close by 4:00 pm on weekdays and remain closed on weekends. c) The Federal Reserve can increase reserves requirements for banks d) The Federal Reserve and raise the discount e) The Federal Reserve can buy US Treasury securities e) The Federal Reserve

The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks occasionally borrow from the Federal Reserve when they find themselves short on reserves. A lower discount rate banks' incentives to borrow reserves from the Federal Reserve, thereby the quantity of reserves in the banking system and causing the money supply to

The Federal Reserve's organization There are 5 , 7, 12 Federal Reserve regional banks.   Which of the following contributes to making the Federal Reserve an independent policymaking body?   A) There are 12 Federal Reserve banks.   B) Its role is written into the U.S. Constitution.   C) Members of the Board of Governors are appointed for 14-year terms.     The Federal Reserve's primary tool for changing the money supply is choice: the reserve requirement, open-market operation, the discount rate. In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will  choice: buy, sell government bonds.

Naked Economics: Undressing the Dismal Science Book by Charles Wheelan   Please refer to the chapter titled, "The Federal Reserve," in the Naked Economics book to answer this question. Which of the below statements DOES NOT CORRECTLY describe the immense power or policy choice of the Federal Reserve (the Fed), as explained in this chapter? 1) The Federal Reserve controls the money supply and therefore the credit tap for the economy.   2) The Fed can use monetary policy to counteract economic downturns, or prevent them from happening.   3) The Fed can inject money into the financial system after sudden shocks, such as the 1987 stock market crash or the terrorist attacks on Sept. 11, 2001.   4) When the Fed opens the credit tap and increases the money supply, interest rates rise and people buy less and borrow less.

The Federal Reserve plays a key role in processing small-value electronic credit or debit transfers, such as direct deposits of payroll or recurring bill payments. The Federal Reserve Board issues paper currency (Federal Reserve notes). Federal Reserve Banks ensure adequate supply of paper currency around the country.

Milton Friedman, the leader for Monetarism had proposed several important arguments regarding the implementation of Monetary Policy. The arguments were listed as: Proposition 1: Monetary Policy has powerful short-run effects on the real economy. In the long run, however, changes in the money supply have their primary effect on the price level.   Proposition 2: Despite the powerful short-run effect of money on the economy, there is little scope for using Monetary Policy actively to try to smooth business cycle. Proposition 3: Even if there is some scope for using Monetary Policy to smooth business cycles, the Central Bank (the Federal Reserve) cannot be relied on to do so effectively. Proposition 4: The Central Bank (the Federal Reserve) should choose a specific monetary aggregate (such as M1 or M2) and commit itself to making that aggregate grow at a fixed percentage rate, year in and year out.   Keynesians economists’ response to the above propositions with this statement:   “Monetary…

Which of these statements is true? Select all correct answers. Relative to February 2021, the Federal Reserve is now more concerned about reducing the rate of inflation than reducing the unemployment rate. The Federal Reserve buys and assets such as U.S. Treasury bonds in open-market operations. The Federal Reserve System is divided into 20 districts. The Federal Reserve removed its longstanding requirement that banks hold 10% of their deposits in reserve either in cash or balances at the Federal Reserve. The principal tool that the Federal Reserve now uses to adjust the federal funds rate is to change the interest it pays on banks' reserve balances (IORB).

The Federal Reserve (also called the Fed) is the central bank of the United States. The Fed oversees the currency and money supply. The Fed system consists of five major parts: (1) the board of governors, (2) the Federal Open Market Committee, (3) 12 Federal Reserve banks, (4) three advisory councils, and (5) the 3,000 member banks in the system. The board of governors administers and supervises the 12 Federal Reserve banks. The 7 members of the board are appointed by the President of the United States and confirmed by the U.S. Senate. The Federal Open Market Committee has 12 voting members and is the policy-making body. The Federal Reserve is a private firm not supported by taxpayer dollars. The Fed buys and sells foreign currencies, regulates various types of credit, supervises banks, and collects data on the money supply and other economic activity. The Fed's actions directly affect everyone in terms of credit card rates, consumer prices, and student loan rates. The Fed uses three…

Which of the following is not true of the U.S. Federal Reserve System? The Fed has representation from commercial banks. The Fed consists of 12 regional banks. The Fed is a part of the U.S. government. The Fed is not owned nor controlled by the federal government.

If the central bank increases the discount rate it charges when it makes loans to banks, then the monetary base will fall and money supply will also fall fall and the money supply will rise rise and the money supply will fall rise and the money supply will rise

The Federal Reserve uses three main tools to conduct monetary policy, which are open market operations, discount rates, and reserve requirements. Please briefly describe how the Federal Reserve implements these three monetary policy tools.

The U.S. money supply (M1) at the beginning of 2015 was $2,683.3 billion broken down as follows: $1,165.7 billion in currency, $3.5 billion in traveler's checks, and $1,514.1 billion in checking deposits. Suppose the Fed decided to increase the money supply by decreasing the reserve requirement from 11 percent to 10 percent. Assume all banks were initially loaned up (had no excess reserves) and the quantity of currency and traveler's checks held outside of banks did not change. How large a change in the money supply would have resulted from the change in the reserve requirement? The money supply would change by $ billion. (Round your response to two decimal places and include a minus sign if necessary.)

What is the primary function of the Federal Reserve in the United States? a) Fiscal policy b) Monetary policy c) Trade policy d) Industrial policy