If the economy is experiencing recession, the Federal Reserve should O Sell government securities O Raise the reserve ratios O Lower the discount rate all of the above none of the above
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- The Federal Reserve has raised the Federal Funds rate by 3.75 percent within the past year. Ifa bank had capital of 10 percent when the Fed began raising rates and has no loans at risk ofdefault, under what circumstances will its capital position be compromised? Please be specific.Over the last 10 years the Federal Reserve has substantially changed the way itoperates. What is different about how the Federal Reserve now conducts policy? a) It is more secretive about interest rate and other policy changes b) it gives the public forward guidance on what it will do c) it places fewer regulations on commercial banks d) it discuesses its policy in public and asks for guidance from CongressSuppose the Fed decides to purchase $60 billion worth of government securities on the open market d. Under what circumstances (recession or inflation) would the Fed be pursuing such an open market policy e. To attain those same objectives, what should the Fed do(increase or decrease) with the: a. Discount rate? b. Reserve requirement?
- Pls select correct option and explain it. Under the floor system of monetary policy, which interest rate serves as a lower bound on the federal funds rate ? a) The overnight, reverse repo rate b) The overnight repo rate c) IOR d) The discount rateThe demand curve and supply curve for one-year discount bonds with a face value of $1,050 are representedby the following equations:Bd: Price = -0.8 * Quantity + 1160Bs: Price = Quantity + 720Suppose that, as a result of monetary policy actions, theFederal Reserve sells 90 bonds that it holds. Assume thatbond demand and money demand are held constant.a. How does the Federal Reserve policy affect the bondsupply equation?b. Calculate the effect on the equilibrium interest rate in this market, as a result of the FederalReserve action.Which monetary policy tool can the Federal Reserve use to conduct an expansionary monetarypolicy (please state at least one instrument)? Which monetary policy instrument can the Fed useto conduct a restrictive monetary policy? Assume the country is experiencing highunemployment and a recession, such as during 2001, 2008-2009, and 2020. What is the Fedlikely to do in this scenario? Discuss the effects of such policy on the economy. Can you givea specific example to what the Fed did during any of those recessions? This is not a writing, it is economic.
- Nobel Prize winner Franco Modigliani found that themost important transmission mechanisms of monetarypolicy involve consumer expenditure. Describe how atleast two of these mechanisms workExplain what would happen if banks were notified they had to increase their required reserves by one percentagepointfrom,say,9%to10%ofdeposits.What would their options be to come up with the cash?Suppose the Fed buys $1 million of bonds from theFirst National Bank. If the First National Bank and allother banks use the resulting increase in reserves topurchase securities only and not to make loans, whatwill happen to checkable deposits?
- Describe the difference betweenan exogenous and an endogenous theory about the money supply.In your view what importantdifferences between the twotheories exist?Consider the model of supply and demand for central bank money. Assumethat there there are commercial banks. Suppose that people hold 20% of their moneyin currency and 80% of their money in deposits. The central bank sets the reserve-todeposit ratio at 10%. In the first period, the central bank increases the supply of moneyby $200, buying bonds through Open-Market Operations. Use this information to answerthe following questions:(a) For the second period (after the central bank has injected $200 in theeconomy), calculate: (i) the demand for currency, (ii) the amount of deposit held atthe commercial banks, (iii) the demand for reserves held at the central bank, and(iv) the demand for the high-powered money. How much is the additional moneysupply created at the end of the second period?2(b) How much is the additional money supply created at the end of the thirdperiod?(c) As time continues, additional money supply will be created. Calculatethe total increase in the money supply as a…During the global financial crisis, how was the Fed ableto help offset the sharp increase in financial frictionswithout the option of lowering interest rates further?Did the Fed’s plan work?