Exam 29: Monetary Policy: Conventional and Unconventional

The Federal Reserve Open Market Committee includes the seven members of the Board of Governors, presidents of 5 of the 12 district banks, and the Secretary of the Treasury.

The Fed is institutionally independent.A major advantage of this is that monetary policy

When the Fed wants to expand the money supply through open-market operation, it

The reserve demand schedule is drawn on a graph that has the quantity of reserves on the horizontal axis and

In 2007, as stock prices in general were falling, many investors began switching their funds into purchasing bonds.Surveys suggest that many of these investors did not understand the basic relationship between bond prices and interest rates.Using a numerical example, illustrate how an increase in the demand for bonds would affect the interest rate paid on bonds.

If the Fed buys a U.S.Treasury bill from a member of the public, the banking system has

Some examples of unconventional monetary policies include massive lending to banks, or even to firms that are nor banks, and open-market purchases of securities other than Treasury bills.

The Federal Reserve System is controlled by the

In reality, commercial banks function most like ____ of the district Federal Reserve Banks.

The discount rate is the rate that the

The Fed conducts an open-market purchase of Treasury bills of $10 million.If the required reserve ratio is 0.10, what change in the money supply can be expected using the oversimplified money multiplier?

Discount rate is the interest rate on the loans that the Fed makes to banks.

In 1998, Japan decided to make the Bank of Japan, its central bank,

The main purpose of expansionary monetary policy is to

The United States was among the first of the modern industrial nations to establish a central banking system.

If the Fed buys more bonds from the public, and increases the price it is willing to pay for the bonds, what will happen to interest rates?

The main reason why the aggregate demand curve slopes downward is that higher prices increases the demand for bank deposits, and hence for bank reserves.

If interest rates increase, what is most likely to happen to the total expenditure schedule?

The current chair of the Federal Reserve System is

Bank lending and deposits tend to change as interest rates change.Can the Fed counteract this tendency?