Answered: If the Treasury pays a large bill to…

If the Treasury pays a large bill to defense contractors and as a result its deposits with the Fed fall, whatdefensive open market operations will the manager ofthe open market desk undertake?

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter13: The Federal Reserve System

Section: Chapter Questions

Problem 11QP

See similar textbooks

Related questions

Q: how does the structiure of the Fed reflect a compromise between centralized (federal) power and…

A: Fed is the central bank. It organizes and controls the monetary system in the country. It is founded…

Q: In contrast to quantitative easing, targeted asset purchases O A. Shift the composition of the…

A: When talking about quantitative easing, it is the situation when the Central Bank tries to increase…

Q: ecisions for Tomorrow Suppose a person who is developing a card game crowdfunds $40,000 and holds…

A: The money supply and credit creation capacity of bank depends on the reserve ratio. The lower the…

Q: Which of the following is NOT an accurate description of open market operation: prior to 2008? O It…

A: Open market operations: The Federal Reserve's (the Fed) approach of purchasing and selling U.S.…

Q: To decrease commercial-bank reserves in the Wakandan banking system, the short-term government…

A: Central bank operates the monetary policy to affect the money supply and economic activities in…

Q: If the economy is experiencing recession, the Federal Reserve should O Sell government securities O…

A: Monetary policy is the policy of the central bank through which the central bank aims to control the…

Q: Given the current balance sheet of the Federal Reserve, if the Federal Reserve buys Treasury…

A: When Fed buys treasury securities from open market operations it is engaged in expansionary…

Q: Is the cash held by public in M2 calculated in the fed's reserve requirement?

A: Initially to know about what M2 is, M1 has to be known which is as: M1 = currency held with the…

Q: The Federal Reserves dual final targets are O employment and inflation O inflation and the federal…

A: The Federal Reserve is the central bank of the United States of America that is set up to provide a…

Q: The Federal Reserve wants to increase the money supply by increasing the lending potential of…

A: The Federal Reserve is the central bank of the US that controls and manages the money supply in the…

Q: If reserves increase by $10 million and the Fed set the required reserve ratio at a very high 80%…

A: Here we calculate the change in checkable deposit and choose the correct option so the calculation…

Q: The federal funds rate changes when the Fed engages in open market operations. O True O False

A: Federal Fund Rate is a rate which is decided by the Federal Open Market Committee. This rate is…

Q: When the Fed began paying banks interest on their reserve deposits with the Fed in 2008, this…

A: In the United States, Fed wants some amount of deposits of the commercial banks as required reserves…

Q: Monetary policy directly includes one of the following instruments: O Evaluationpolitikk O Control…

A: Monetary policy is the tools used by central bank of economy to Influence the entire monetary…

Q: Suppose that from a new checkable deposit, First National Bank holds eight million dollars on…

A: Given : Deposit with Federal Reserve = 8 Million $ Excess Reserves=9 Milllion $ Required Reserve…

Q: The goal of unconventional monetary policy tools is to O A. decrease short term interest rates to…

A: Unconventional monetary policy is similar to other monetary policy.

Q: The major protection against a sudden massattempt to withdraw cash from banks is thea. Federal…

A: A bank run refers to a situation when all depositors at once rush to the bank in order to withdraw…

Q: Which of the following is NOT one of the monetary policy tools of the Federal Reserve? O open-market…

A: Monetary policy tools are: Open market operations: like sell or purchase of bonds. Discount rate:…

Q: Fed Operation Describe the exact mechanism through which increasing reserve requirements affects…

A: Discount Rate: The discount rate is the rate at which banks take a loan from other banks (say…

Q: What are the tools in its monetary toolbox? O Issuing Treasury Bonds O Changing the reserve…

A: The nations have various decision making, and policy making authorities who are involved in the…

Q: Refer to the table below and assume that the Fed's reserve ratio is 10 percent and the economy is in…

A: a) Given:At RR=10%Checkable deposits=$20000Excess reserve=$3000Now,13rd of Excess…

Q: How are M1 and M2 equations related to reserve market (interbank)? Let’s say, central bank applies…

A: Money supply refers to the total money stock which is in circulation within the general public at a…

Q: If the central bank purchases securities worth $ 500 million from banks, it will result in an…

A: The monetary base includes the total amount of currency in circulation, including the cash in the…

Q: At time t=0, Rs= 10%, Re= 10%, and Es/e=E®s/E=1 Assume the Reserve Bank of Australia (RBA)…

A: PLEASE FIND THE ANSWER BELOW.

Q: What actions by a bank increase the probability it may face a bank run? O It exercises caution in…

A: For the given question, the actions by a bank that increase the probability it may face a bank run…

Q: The chief function of the central bank in an economy is to control the money supply. O True O False

A: Central bank of the country is responsible for the regulating the money supply in the economy.

Q: The following graph shows a hypothetical demand function for federal funds . Currently , the total…

A: Given:Discount rate=3.5 percentInterest on reserves=1 percent

Q: Which one of these tasks is a role that the Fed has? Select one: O a. Giving tax credits (reducing…

A: The Federal Reserve, the United States' central bank, attempts to minimise unemployment while…

Q: The Federal Reserve purchases $12 million in US. Treasury bonds from a bond dealer, and the dealer's…

A: Treasury bonds (also known as T-bonds) are government debt securities issued by the United States…

Q: Suppose now the Fed, as part of its "Quantitative Easing" policy, conducts an open market purchase…

A: Quantitative easing refers to the nontraditional technique used by the central bank or Fed to…

Q: Assume that the Fed injects $100 million into the banking system with an open market purchase. Using…

A: Fed Inject $100 million

Q: What actions by a bank increase the probability it may face a bank run? O It exercises caution in…

A: For the given question, the actions by a bank that increase the probability it may face a bank run…

Q: Classify each of the following as either a policy instru- ment or an intermediary target. Explain…

A: In an economy policy instruments and intermediary targets are two different ways that are used by…

Q: mo

A: The three instruments of monetary policy of Federal Reserve are the discount rate,open market…

Q: Assume the Fed sells $32,140 worth of U.S. Treasury bonds to the First National Bank. that the…

A: Required reserve ratio is 10.5 % Money multiplier = 1 / Required reserve ratio => Money…

Q: Consider the above graph that shows demand for excess reserves by the banking system as a whole. The…

A: Economics refers to the social science that studies the production, distribution, and consumption of…

Q: Using the supply and demand analysis of the marketfor reserves, indicate how the following…

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: If the required reserve ratio is 25 percent and the Fed buys a $20,000 security from a depository…

A: The money supply is the total amount of money in circulation in a given economy. Currency, printed…

Q: Using T-accounts, explain what happens to reserves when the Federal Reserve sells T- bills. 3)…

A: Selling of T-bills by the federal reserve is part of contractionary monetary policy and comes under…

Question

If the Treasury pays a large bill to defense contractors and as a result its deposits with the Fed fall, what
defensive open market operations will the manager of
the open market desk undertake?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

In today's ample reserves regime, does the Fed set a target level or range for the federal funds rate, and how is it achieved? The Fed achieves its federal funds rate target _______. A. level by setting the discount rate and the interest on reserves rate B. range because whatever the supply of reserves, the rate is between the discount rate and the interest on reserves rate C. level by conducting daily open market operations D. range by setting the supply of reserves equal to the quantity of reserves demanded at the range midpoint thanks!
Suppose that Mountain Star Bank discovers that its reserves will temporarily fall slightly below those legally required. How might it temporarily remedy this situation through the Federal funds market? Now assume Mountain Star finds that its reserves will be substantially and permanently deficient. What remedy is available to this bank?
What procedures can the Fed use to control the federalfunds rate? Why does control of this interest rate implythat the Fed will lose control of nonborrowed reserves?
Since the 1990's, the Fed has been using a. M1 b. M2 C. The fed funds rate d. The Treasury bond rate as its short-run operating target.
Discuss how the money supply is increased through the process of the Fed purchasing bonds in the open market. What is the signficance of doing so?
Marly Bank currently has $650M in transaction deposits on its balance sheet. The current reserve requirenment is 10 percent, but the Federal Reserve is decreasing this requirement to 9 percent. Show the balance sheet for the federal reserve and Marly Bank if Marly Bank converts all excess reseves to loans, but borrowers return only 60 percent of these funds to National Bank as transaction deposit.
Please choose the correct answers: If everyone in the economy decides to close their bank accounts and hold all their money onhand, this will cause overall M1 to rise / fall / remain unchanged / change ambiguously andoverall M2 to rise / fall / remain unchanged / change ambiguously. Money functions as a medium of exchange because it is readily exchangeable for other goods.A) TrueB) FalseMoney supply rises when banks decide to hold excess reserves over and above what they arelegally required to hold against deposits.A) TrueB) False
If the Fed desired to reduce the federal funds rate, OA. it would conduct an open market purchase, reducing reserve dema O B. it would conduct an open market sale, reducing reserve supply. OC. it would conduct an open market purchase, increasing reserve sup OD. it would conduct an open market sale, increasing reserve demand..
Using the supply and demand analysis of the marketfor reserves, indicate how the following situationswould affect central bank interest rates and economiesin general.a. The central bank eliminates interest paid on excessreserve.b. The central bank introduces special interest rates(lower than usual) for commercial banks and setsspecial auction.c. The central bank conducts an open market sale ofcertain securities.d. The central bank sets negative interest rates on bankdeposits.e. The central bank increases reserve requirements.
The Federal Reserve has decided it wants to increase interest rates by decreasing the money supply through deposits held at financial intermediaries. All else equal, if the reserve requirement is 10% for all deposits, and the Fed wants to decrease deposits by $100 million, which of the following actions should be taken? Assume no excess reserves exist in the banking system.a. Buy government securities from dealers totaling $1 billion.b. Sell government securities to dealers totaling $111 million.c. Buy government securities from dealers totaling $11.1 million.d. Sell government securities to dealers totaling $11.1 million.e. None of the above.