Exam 18: Tools of Monetary Policy

The Federal Reserve ________ pay interest on reserves held on deposit. The European System of Central Banks ________ pay interest on reserves held on deposit.

The Fed prefers that ________ so that ________

When bad storms slow the check-clearing process, float tends to ________ causing the Fed to initiate defensive open market ________.

In the market for reserves, if the federal funds rate is above the interest rate paid on excess reserves, an open market sale ________ the ________ of reserves, causing the federal funds rate to increase, everything else held constant.

In the market for reserves, a lower discount rate

A financial panic was averted in October 1987 following "Black Monday" when the Fed announced that

Which of the following is NOT an argument for the Federal Reserve paying interest on excess reserve holdings?

Everything else held constant, the vertical section of the supply curve of reserves is lengthened when the

In the market for reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves, an increase in the reserve requirement ________ the demand of reserves and causes the federal funds interest rate to ________, everything else held constant.

The Federal Reserve will engage in a matched sale-purchase transaction when it wants to ________ reserves ________ in the banking system.

Suppose on any given day the prevailing equilibrium federal funds rate is below the Federal Reserve's federal funds target rate. If the Federal Reserve wishes for the federal funds rate to be at their target level, then the appropriate action for the Federal Reserve to take is a ________ open market ________, everything else held constant.

Open market sales ________ reserves and the monetary base thereby ________ the money supply.

Everything else held constant, in the market for reserves, when the federal funds rate is 5%, lowering the discount rate from 5% to 4%

The most common type of discount lending that the Fed extends to banks is called

The discount rate is

Everything else held constant, in the market for reserves, when the supply for federal funds intersects the reserve demand curve along the horizontal section of the demand curve, lowering the interest rate paid on excess reserves

State whether the following statement is true or false AND explain why: "An increase in the interest rate paid on excess reserves will always cause an increase in the federal reserve funds rate."

The interest rate charged on overnight loans of reserves between banks is the

When good weather speeds the check-clearing process, float tends to ________ causing the Fed to initiate defensive open market ________.

The policy tool of changing reserve requirements is