ECON Lowdown: The Fed's New Monetary Policy Tools(A+ Guaranteed Answers)
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Module
Econ
Institution
Econ
What are the Fed's dual mandate goals? correct answers Maximum employment and price stability
Which monetary policy tool is a supplementary tool that sets a floor for the federal funds rate? correct answers ON RRP facility
Which of the following best describes how arbitrage makes interest on ...
ECON Lowdown: The Fed's New Monetary Policy Tools(A+
Guaranteed Answers)
What are the Fed's dual mandate goals? correct answers Maximum employment and price stability
Which monetary policy tool is a supplementary tool that sets a floor for the federal funds rate? correct
answers ON RRP facility
Which of the following best describes how arbitrage makes interest on reserves an effective tool? correct
answers If the federal funds rate falls far below the interest on reserve balances rate, banks will borrow at
the federal funds rate and deposit the funds at the Fed to earn the interest on reserve balances rate and
earn a profit. Many banks will seize on this opportunity, which will raise the federal funds rate.
Which of the following letters from the graph is the ON RRP offering rate? correct answers D
How does increasing the federal funds rate affect the economy? correct answers A higher federal funds
rate discourages consumer spending and reduces business investment.
When the FOMC conducts monetary policy, it sets the target range for the correct answers federal funds
rate.
Which of the following letters from the graph is the discount rate? correct answers A
Assume economic growth is very strong and the inflation rate rises above the Fed's price stability goal.
Which of the following would best describe an appropriate policy implementation? correct answers Raise
the interest on reserve balances rate, ON RRP offering rate, and discount rate.
Which monetary policy tool is the primary tool the Fed uses to adjust the federal funds rate? correct
answers Interest on reserve balances (IORB)
Which of the following letters from the graph indicates the line the Fed would shift using open market
operations? correct answers F
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