Macroeconomics
13th Edition
ISBN: 9780134744452
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 8, Problem 4SPA
(a)
To determine
Identify the transactions between Fed and Wells, when the Fed sells $20 million of securities to Wells.
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Students have asked these similar questions
When the Federal Reserve buys government securities from a bank, the money supply ________ and interest rates ________.
increases; rise
decreases; rise
decreases; fall
increases; fall
Over the last 10 years the Federal Reserve has substantially changed the way it operates. What is different about how the Federal Reserve now conducts policy?
options:
it discusses its policy in public and asks for guidance from Congress
it gives the public forward guidance on what it will do
It is more secretive about interest rate and other policy changes
it places fewer regulations on commercial banks
The federal funds rate
A. equals the discount rate.
B. only matters to banks and has very little impact on individual consumers.
C. is set by the Federal Reserve Bank.
D. is the rate that banks charge each other for short-term loans of excess reserves.
Chapter 8 Solutions
Macroeconomics
Ch. 8.1 - Prob. 1RQCh. 8.1 - Prob. 2RQCh. 8.1 - Prob. 3RQCh. 8.1 - Prob. 4RQCh. 8.1 - Prob. 5RQCh. 8.2 - Prob. 1RQCh. 8.2 - Prob. 2RQCh. 8.2 - Prob. 3RQCh. 8.2 - Prob. 4RQCh. 8.2 - Prob. 5RQ
Ch. 8.3 - Prob. 1RQCh. 8.3 - Prob. 2RQCh. 8.3 - Prob. 3RQCh. 8.3 - Prob. 4RQCh. 8.3 - Prob. 5RQCh. 8.4 - Prob. 1RQCh. 8.4 - Prob. 2RQCh. 8.4 - Prob. 3RQCh. 8.5 - Prob. 1RQCh. 8.5 - Prob. 2RQCh. 8.5 - Prob. 3RQCh. 8.5 - Prob. 4RQCh. 8.5 - Prob. 5RQCh. 8.6 - Prob. 1RQCh. 8.6 - Prob. 2RQCh. 8.6 - Prob. 3RQCh. 8.6 - Prob. 4RQCh. 8 - Prob. 1SPACh. 8 - Prob. 2SPACh. 8 - Prob. 3SPACh. 8 - Prob. 4SPACh. 8 - Prob. 5SPACh. 8 - Prob. 6SPACh. 8 - Prob. 7SPACh. 8 - Prob. 8SPACh. 8 - Prob. 9SPACh. 8 - Prob. 10APACh. 8 - Prob. 11APACh. 8 - Prob. 12APACh. 8 - Prob. 13APACh. 8 - Prob. 14APACh. 8 - Prob. 15APACh. 8 - Prob. 16APACh. 8 - Prob. 17APACh. 8 - Prob. 18APACh. 8 - Prob. 19APACh. 8 - Prob. 20APACh. 8 - Prob. 21APACh. 8 - Prob. 22APACh. 8 - Prob. 23APACh. 8 - Prob. 24APACh. 8 - Prob. 25APACh. 8 - Prob. 26APACh. 8 - Prob. 27APA
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- Topic: Federal Reserve and the Central Bank Question: What is a bank run and why might a bank run worsen if a bank has to sell assets in response to depositors’ withdrawals?arrow_forwardThe 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____________(increases/decreases) banks' incentive to borrow reserves from the Federal Reserve, thereby __________( increasing / decreasing) the quantity of reserves in the banking system and causing the money supply to _______(rise/ fall) .arrow_forwardCommercial banks that go to the discount rate window to borroe funds from the Federal Reserve, may a. not be able to borrow funds from other bank based on the Fed Funds rate b. needs to pay a penalty rate to borrow from the Federal Reserve c. may need that their internal balances and accounts be scrutinized by the Federal Reserve d. All of the abovearrow_forward
- Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?arrow_forwardThe initial condition of the banking system is as follows: $150 billion in reserve, $1,350 billion in loans and investments, and 1,500 billion in deposits. The required reserve is 10%. The Fed buys $100 billion government securities using open market operation. What is the maximum amount of loans in the banking system as a result of such Fed operation?arrow_forwardWhich of the following is a major difference between the US Federal Reserve system and the European Central Bank? A. Federal Reserve Bank budgets are centrally controlled B. Monetary operations are centrally controlled by the Fed C. ECB does not supervise or regulate financial institutions D. All of the abovearrow_forward
- If the Bank of Canada were to conduct an open market sale, it would Select one: a. decrease the money supply and increase output. b. increase the money supply and decrease output. c. increase the money supply and increase output. d. decrease the money supply and decrease output.arrow_forwardThe Federal Reserve Board of Governors has the power to raise or lower short-term interest rates. Between 2005 and 2006, the Fed aggressively increased the benchmark federal funds interest rate from 2.5 percent in February 2005 to 5.25 percent in June 2006, where it remained until July 2007. From July 2007 to December 2008, the Fed rapidly decreased the federal funds rate, where it dropped to 0.16 percent and remained between 0.07 percent and 0.20 percent through November 2015, after which it again began to rise. Assuming that other interest rates also increased and then decreased along with the federal funds rate, what effects do you think those moves had on investment spending in the economy? Explain your answer. What do you think the Fed’s objective was in increasing and then decreasing the federal funds rate? When and why might the Fed decide to start raising the federal funds rate?arrow_forwardArticle Summary In a September 2013 speech to the Independent Bankers Association of Texas, Federal Reserve Bank of Dallas president Richard Fisher stated that the Fed's credibility was harmed when it announced the previous week that it would continue its large bond purchasing program. In June, Fed Chairman Ben Bernanke had stated that that the program could begin to be cut back later in the year, and several other Fed officials expressed being open to the announced timing of this policy. Bernanke's change in his announced timeline of the Fed's intentions regarding the bond purchasing program brought criticism that the Fed had misled investors. In his speech, Fisher stated "I disagreed with the decision of the committee and argued against it. Doing nothing at this meeting would increase uncertainty about the future conduct of policy and call the credibility of our communications into question. I believe that is exactly what has occurred, though I take no…arrow_forward
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