Question

In: Economics

The reason most economists believe the Fed targets ________ is because of constant shifts in ________...

The reason most economists believe the Fed targets ________ is because of constant

shifts in ________ caused by changes in transaction technologies.

A) interest rates; the money supply

B) the money supply; money demand

C) interest rates; money demand

D) the money supply; interest rates

The FOMC has ________ members: the ________ members of the Board of Governors

and the presidents of ________ of the Federal Reserve Banks.

A) ten; seven; three

B) twelve; seven; five

C) three; two; one

D) seven; seven; zero

Open-market operations are conducted ________ at the open-market desk at the

________.

A) monthly; Bank of America

B) weekly; FOMC headquarters in Washington, DC

C) daily; Federal Reserve Bank of New York.

D) daily; Treasury Department

Solutions

Expert Solution

1)C...... interest rates ; money demand.............................. because, if feds target money supply, shifts in money demand will either increase or decrease interest rates due to fixed money supply. If feds target interest rates,any shift in money demand will also change money supply to maintain interest rates.

2)B............... because, The federal open market committee (FOMC) consists of twelve members--the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.

3)C....... daily ; federal reserve bank of Newyork..................... because, Open market operations (OMOs)--the purchase and sale of securities in the open market by a central bank--are a key tool used by the Federal Reserve in the implementation of monetary policy. OMOs are conducted by the Trading Desk at the Federal Reserve Bank of New York.


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