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 7 months ago

Define monetary policy. Describe the mechanism that leads from a change in monetary policy to changes...

Define monetary policy. Describe the mechanism that leads from a change in monetary policy to changes in interest rates, exchange rates, and the current account balance.

Critically and briefly describe the following conventional monetary policy tools and policy target and their relative...

Critically and briefly describe the following conventional monetary policy tools and policy target and their relative effectiveness in controlling business cycle fluctuations such as state of recession and/or state of inflation. How do they operate during recession and inflation? Draw AD-AS diagram of macroeconomics model to illustrate your explanation in words. Reserve Requirements Discount Rate Open Market Operations Federal Fund Rate (Policy target) Distinguish between budget deficit and public debt with an example from actual data from the US government...

Which of the following events would strengthen the argument for the use of monetary policy and...

Which of the following events would strengthen the argument for the use of monetary policy and weaken the argument for the use of fiscal policy? I. Investment spending becomes more sensitive to changes in interest rates. II. A balanced budget amendment is passed and made effective. III. International trade and financial flows become a more important part of the U.S. economy. A I only B II only C I and II only D II and III only E I, II,...

Which of the following would not be considered pure contractionary fiscal policy? A. A cut in...

Which of the following would not be considered pure contractionary fiscal policy? A. A cut in taxes matched by an equal cut in spending. B. A cut in spending used to finance a cut in the money supply. C. A cut in spending in order to buy back some outstanding government bonds. D. A tax increase used to buy back some outstanding government bonds.

Which of the following is NOT an example of monetary policy?

Which of the following is NOT an example of monetary policy? a. The Federal Reserve reduces the reserve requirements. b. The Federal Open Market Committee decides to sell bonds. c. The Federal Reserve facilitates bank transactions by clearing checks. d. The Federal Open Market Committee decides to buy bonds.

Which of the following best describes the difference between monetary policy and fiscal policy? Monetary policy...

Which of the following best describes the difference between monetary policy and fiscal policy? Monetary policy is quicker to implement but has a longer effect lag than fiscal policy. Monetary policy is slower to implement but has a longer effect lag than fiscal policy. Monetary policy is quicker to implement but has a shorter effect lag than fiscal policy. Monetary policy is slower to implement but has a shorter effect lag than fiscal policy.

Which of the following statements would you say best reflects monetary policy? a. It is a...

Which of the following statements would you say best reflects monetary policy? a. It is a lot like gambling because the outcomes are most of the time uncertain. b. There is certainly some science involved, a lot of understanding that is needed, but a lot of uncertainty still remains. c.It is a hard and fast science. d. It is a hard and fast science.

In which of the following situations would the Reserve Bank of Australia conduct contractionary monetary policy?...

In which of the following situations would the Reserve Bank of Australia conduct contractionary monetary policy? A.The RBA fears that unemployment is climbing above the natural rate of unemployment. B.The RBA is worried that deflation will become a problem. C.The RBA is concerned that the natural unemployment rate is trending downward. D.The RBA is concerned that the growth in aggregate demand would continue to exceed the growth in potential GDP. E.The RBA believes that aggregate demand is growing too slowly...

For each of the following policy changes, explaim why the change is or is not likely...

For each of the following policy changes, explaim why the change is or is not likely to be a Pareto improvement. a) Building a park, financed by an increase in the local property tax rate b) Building a park, financed by the donatiom of a rich philanthropist c)Increasing medical facilities for lung cancer, financed out of a general revenues d)Increasing medical rate facilities for lung cancer, finances out of an increase in the cigarette tax

Monetary policy and fiscal policy often change at the same time.

Monetary policy and fiscal policy often change at the same time. (a) Suppose the government wants to raise investment but keep output constant. In the IS-LM model, what mix of monetary and fiscal policy will achieve this goal? In other words, what needs to happen to M and G or T? Sketch the IS-LM model and illustrate your answer graphically. (b) In the early 1980s, the U.S. government cut taxes and ran a budget deficit while the Fed pursued a tight monetary...