Question

In: Finance

Which of the following policy changes would be considered a conventional monetary policy change? -Announcing a...

Which of the following policy changes would be considered a conventional monetary policy change?

-Announcing a firm policy to conduct large scale open market purchases in the future.

-An open market sale of securities to increase the fed funds rate.

-Federal Reserve lending through the Term Auction Facility

-Purchases of long-term securities to lower long-term interest rates.

Which of the following policy changes would be considered an unconventional monetary policy change?

-An open market purchase of securities to decrease the fed funds rate.

-An decrease in reserve requirements to decrease the fed funds rate.

-Announcing a firm policy to conduct large scale open market purchases in the future

-An open market sale of securities to increase the fed funds rate.

Expert Solution

Answer 1:

Correct answer is:

-An open market sale of securities to increase the fed funds rate.

Explanation:

Open market sale and purchase of securities is a conventional monetary policy to control inflation and depression respectively.

When there is inflation the conventional monetary policy is an open market sale of securities to increase the fed funds rate.

As such option B os correct and other options A, C and D are incorrect.

Answer 2:

Correct answer is:

-Announcing a firm policy to conduct large scale open market purchases in the future

Explanation:

Open market sale and purchase of securities or increase and decrease in reserve requirements are a conventional monetary policy changes to control inflation and depression respectively.

But announcing a firm policy to conduct large scale open market purchases in the future is unconventional monetary policy change to inject money directly.

Hence option C is correct and other options A, B and D are incorrect.

jeff jeffy answered 9 months ago

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