What are the economic risks of aggressive fed open market purchases

Solutions

Expert Solution

It’s better to know that different economists would tackle the question in different ways. It sometimes in due to the central bank’s monetary status, most of the federal reserve policy could get nerves and be worried because it could to a massive damage to everyone.

Moreover, policy makers can get stressed over expanded dangers because of the national bank's aggressive monetary stimulus; however most view those risks as "reasonable" for the time being. Minutes from the latest Fed meeting recommend that individuals have grown increasingly worried that things could get untidy in the event that it proceeds with its asset-purchasing and money-printing policies too far into the future.

In the words of March meeting minutes, "In particular, participants pointed to possible risks to the stability of the financial system, the functioning of particular financial markets, the smooth withdrawal of monetary accommodation when it eventually becomes appropriate, and the Federal Reserve's net income,"

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

What are the Economic Risks of Aggressive FED Open Market Purchases?

If the Fed conducts open-market purchases, the money supply

If the Fed conducts open-market purchases, the money supply increases and aggregate demand shifts right. increases and aggregate demand shifts left. decreases and aggregate demand shifts right. decreases and aggregate demand shifts left.

Using a separate AS-AD diagram for each part, illustrate the following: a. Aggressive open market purchases...

Using a separate AS-AD diagram for each part, illustrate the following: a. Aggressive open market purchases assuming the economyis initiallyin a recessionary gap. b. Aggressive open market sales assuming the economy is initially in an inflationarygap. c. Aggressively lowering the Federal Funds rate assuming the economy is initially at potential output.

Open market operations are the Fed’s traditional method of managing the fed funds rate. But open...

Open market operations are the Fed’s traditional method of managing the fed funds rate. But open market operations will not work well today. Why?

If the Fed sells government securities to the general public in the open market, the A)...

If the Fed sells government securities to the general public in the open market, the A) public gives the securities to the Fed in exchange for a Fed check, which when deposited at commercial banks will decrease their reserves at the Fed. B) Fed gives the securities to the public; the public pays for the securities by writing checks that when cleared will increase commercial bank reserves at the Fed. C) public gives the securities to the Fed in exchange...

Describe the Board of Governors of the Fed and the Open Market Committee (FOMC).

When the Fed wants to contract the money supply through open market operations, what would it...

When the Fed wants to contract the money supply through open market operations, what would it do with the government bonds and what would happen to the reserves the Fed or the member banks hold?

in a open market operations the fed buys 15 million of government bonds from individuals what...

in a open market operations the fed buys 15 million of government bonds from individuals what is the results

Draw a IS-LM graph describing the effect of an open market purchase by the Fed on...

Draw a IS-LM graph describing the effect of an open market purchase by the Fed on equilibrium GDP and the interest rate. Draw a graph explaining the effect of an open market sale by the Fed on equilibrium GDP and the interest rate.

The economy is in a recession. The FED engages in an open market operation (OMO). Explain...

The economy is in a recession. The FED engages in an open market operation (OMO). Explain in detail how the economy will react. Explain the OMOs impact on asset allocations and the prices of securities; Explain how the OMO will impact the real economy, explain each step of the adjustment process, graph the process.

Subjects