Under current Fed practice, changes in policy made by the FOMC 41) Discount policy 42) The oldest po

Under current Fed practice, changes in policy made by the FOMC

41) Discount policy

42) The oldest policy tool of the Fed is

43) An increase in the volume of discount loans

44) A decrease in the volume of discount loans

45) The discount window is

46) Which of the following statements is NOT true?

47) Since 1980, discount loans have been available

48) A higher discount rate exerts upward pressure on other short-term interest rates because

49) All of the following statements about secondary credit are true EXCEPT

50) Which of the following statements is true?

51) Discount loans available to health banks which can be used for any purpose are called

52) Discount loans intended for banks that are not financially healthy are called

53) Temporary, short-term discount loans to banks in areas in which agriculture and tourism are important are known as

54) Which of the following statements is correct?

55) Which type of loan has the highest interest rate?

56) Primary credit is only a backup source of funds for health banks since

57) Which of the following statements concerning seasonal credit is true?

58) Discount loans in the form of primary credit tend

59) The Fed

60) If the Fed is generous in its granting of discount loans during a crisis,

61) The Fed tends not to use discount policy as its principal tool in influencing the money supply since

62) According to the efficient markets hypothesis

63) The Fed

64) Which of the following statements is true?

65) Reserve requirements

66) When did Congress first give the Board of Governors authority over reserve requirements?

67) In 1980, the Depository Institutions Deregulation and Monetary Control Act

68) Reserve requirements are changed

69) Between 1950 and 1980, the Fed adjusted required reserve ratios

70) Which of the following is true of current reserve requirements?

71) The Fed monitors reserve requirements

72) As of 2006, what was the reserve requirement for checkable deposits?

73) All of the following are ways a bank may meet its reserve requirement EXCEPT

74) Banks that can’t meet their reserve requirements

75) During the mid-to-late 1930s

76) Under a 100% reserve system

77) How does the reserve policy of the European Central Bank (ECB) differ from the reserve policy of the Fed?

78) The main way in which the Fed’s policy tools affect the monetary base is through

79) As the federal funds rate rises,

80) If the federal funds rate was above the discount rate,

81) In the federal funds market diagram, an open market sale by the Fed

82) In the federal funds market diagram, a decrease in the discount rate

83) In the federal funds market diagram, a decrease in the required reserve ratio

84) In order to increase its target for the federal funds rate, the Fed would normally

85) A decrease in Federal Reserve float will

86) If the Fed desired to reduce the federal funds rate,

20.2 Essay Questions

1) Is it possible to deduce the Fed’s intentions for monetary policy from observing the Fed’s trading activity?

2) What important change did the Fed make in its FOMC statement in February 2000? What change in the FOMC’s views on the economy became evident from the FOMC statements issue between November 2000 and January 2001?

3) A member of Congress argues: “The Fed has too much discretion over granting discount loans. Congress should set the discount rate and then require that the Fed grants loans to any depository institution that wishes to borrow at that rate.” Do you agree that this would be good policy?

4) At one time Milton Friedman proposed that banks be obliged to hold 100% reserves against deposits. If this proposal were adopted, how would the relationship between M1 and the monetary base change? How would the process of financial intermediation be affected by the proposal?

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