Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
7th Edition
ISBN: 9780134472669
Author: Blanchard
Publisher: PEARSON
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Question
Chapter 21, Problem 8QAP
a
To determine
To find:Whether the goals of FED are clear by reading the excerpt.
b)
To determine
To find: Whether the excerpts from the act are consistent with the position of U.S.
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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.
41) The current chairman of the Federal Reserve System is
A) Milton Friedman.
B) Alan Greenspan.
C) President Obama.
D) Ben Bernanke.
42) The chairman of the Federal Reserve's Board of Governors
A) controls the agenda of the Federal Open Market Committee meetings.
B) is the main point of contact between the Fed and the President of the U.S.
C) receives frequent background briefings on monetary policy issues from a large staff of economists and technical experts.
D) All of the above answers are correct.
43) Most of the day-to-day power in monetary policy decisions lies with
A) the President of the United States
B) the Senate Banking Committee
C) the chairman of the Board of Governors
D) large commercial banks
44) On the Fed's balance sheet, assets include
A) depository institutions deposits at the Federal Reserve and loans to depository institutions.
B) U.S. government securities and loans to depository institutions.
C)…
Which statement best describes the Federal Reserve's current level of transparency to the American public?
The actions of the Fed are largely carried out in secrecy with little regard to public transparency.
The Fed is somewhat transparent with regard to some aspects of monetary policy, but does not disclose details regarding macroeconomic conditions and goals.
The Fed is extremely transparent with regard to monetary policy and discloses goals, targets, and predictions for the macroeconomy.
The Fed only reports to the American public during periods of economic slow down.
Chapter 21 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
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- How might each of the following factors complicate the implementation of monetary policy: long and variable lags, excess reserves, and movements in velocity?arrow_forwardWhich kind of monetary policy would you expect in response to high inflation: expansionary or contractionary? Why?arrow_forwardWhen economists speak of the "zero lower bound problem" that the Fed sometimes faces, what are they referring to? 1. It is when short term interest rates are close to zero meaning the Fed can no longer use changes in interest rates to stimulate the economy 2. It is when economic growth in the economy has reached zero percent and the Fed must use aggressive monetary policy 3. It is when the Fed has sold all the securities on its balance sheet and can no longer impact the money supply using open market operations 4. It is when banks choose to hold no excess reserves, making it impossible for the Fed to lower the discount ratearrow_forward
- QUESTION 7 What are the two components of the Fed's dual mandate? A. Interest rate stability and foreign exchange stability B. Price stability and output stability C. Output stability and financial market stability D. Price stability and interest rate stabilityarrow_forwardWhich of the following is not one of the tools of monetary policy used by the Fed? Changing the discount rate and the federal funds rate Changing the reserve requirement OMO buying and selling securities OMO changing the level of spending. All of the answers are tools of monetary policy.arrow_forwardOn March 26, 2020, the Federal Reserve abolished reserve requirements (the required reserve ratio = 0%). What two major considerations led the Fed take such an unprecedented actionarrow_forward
- Question 1 Which of the following Fed actions will increase bank lending? Select one or more answers from the choices shown. The Fed raises the discount rate from 5 percent to 6 percent. The Fed raises the reserve ratio from 10 percent to 11 percent. The Fed buys $400 million worth of Treasury bonds from commercial banks. The Fed lowers the discount rate from 4 percent to 2 percent. Note that Fed sets a discount rate that it charges to banks for short-term loans, which then contributes to the rate that the banks charge customers on their loans. While the Fed has the ability to issue Federal Reserve Notes, the paper currency used in the U.S. monetary system, they do not print the money. That task is still performed by the U.S. Mint. After the financial crisis of 2007-2008, Congress increased the Fed’s supervisory powers. Question 2 Describe tools that the US Treasury and the Federal Reserve use to undertake restrictive monetary policy today (versus before the mortgage-debt…arrow_forwardIn setting monetary policy, the Federal Reserve oversees the operation of 12 Federal Reserve Banks, which carry out Fed policies and perform banking services for commercial banks in their districts. These Federal Reserve Banks are owned by ) a the Treasury Department • b) the member commercial banks in their district C) the state government where they are located d) the federal governmentarrow_forwardThe Federal Reserve Bank relies on three tools to engage in monetary policy: Question 7 options: a) the legal reserve requirements, the discount rate, and the federal funds rate b) taxes, government spending, and government transfers c) taxes, legal reserve requirements, and the discount rate d) government spending, the discount rate, and the federal funds ratearrow_forward
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