Assume federal funds rate is greater than the interest rate paid
on reserves. What happens to...
Assume federal funds rate is greater than the interest rate paid
on reserves. What happens to the federal funds rate when the Fed
increases the interest rate on reserves? Draw the graph and explain
in simple terms
Assume federal funds rate is greater than the interest rate paid
on reserves. What happens to the federal funds rate when the Fed
increases the interest rate on reserves? Draw the graphand
explain.
(1) If the interest rate in Japan is greater than the interest
rate in the United States, other things held constant, according to
interest rate parity, will the Japanese Yen appreciate or
depreciate against US dollar?
(2) If Mexico experiences a hyperinflation (very high inflation)
relative to the US, other things held constant, according to the
parity condition, will the Mexican Peso appreciate or depreciate
against US dollar?
4. Utilizing the market for reserves and assuming that initially
the federal funds rate is 1 percentage point below the discount
rate but 1 percentage point above the interest rate paid on
reserves,
a. Show what would happen to the federal funds rate if the FED
decreased the discount rate by 0.5 percent
b. Show what would happen to the federal funds rate if the FED
increased the interest rate paid on reserves by 0.5 percent
2.2Why does an increase in the federal funds rate decrease the
quantity of reserves demanded? At what interest rate does the
demand curve for reserves become perfectly elastic?
2.3 Briefly explain what determines the supply curve for
reserves. Why does the supply curve have a horizontal
segment?
Utilizing the market for reserves and assuming that initially
the federal funds rate is 0.5 percentage point below the discount
rate but 0.5 percentage point above the interest rate paid on
reserves,
a. Show what would happen to the federal funds rate if the FED
decreased the discount rate by 0.3 percent
b. Show what would happen to the federal funds rate if the FED
increased the interest rate paid on reserves by 0.75 percent
The Federal Reserve believes that a certain rate of interest on
Federal Funds is associated with price stability (which is 2% rate
of inflation). However, the Federal Funds rate tends to fluctuate
with the changes in the demand for federal funds by the banking
system. Hence, to maintain the Federal Funds rate at the desired
rate or to raise it or lower it to a new rate the Federal Reserve
System undertake open market operations, or few other
measures.
What...
What is the federal funds rate? Would you classify the federal
funds rate as a policy instrument, and operating target, an
intermediate target, or a policy goal? Explain.
A. The discount window and the federal funds market The discount
rate is the interest rate the Fed charges on loans of reserves to
banks. The federal funds rate is the interest rate banks charge for
overnight loans of reserves to other banks. Which of the following
statements about the discount rate and the federal funds rate are
true?
Check all that apply
A.). A lower discount rate discourages banks from borrowing
reserves and making loans.
B.) Usually, banks borrow...
Use
the loanable funds market, explain what happens to the equilibrium
interest rate and equilibrium quantity of loanable funds when:
a, Households are optimistic about future economic condition
and want to save less.