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Tutorial 9 FMT
Tutorial 9 FMT
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14. In the market for reserves, when the federal funds interest rate is below the
discount rate, the supply curve of reserves is
A. vertical.
B. horizontal.
C. positively sloped.
D. negatively sloped.
15. When the federal funds rate equals the discount rate
A. the supply curve of reserves is vertical.
B. the supply curve of reserves is horizontal.
C. the demand curve for reserves is vertical.
D. the demand curve for reserves is horizontal.
16. In the market for reserves, an open market the supply of reserves,
raising the federal funds interest rate, everything else held constant.
A. sale decreases
B. sale increases
C. purchase increases
D. purchase decreases
17. Suppose on any given day there is an excess demand of reserves in the
federal funds market. If the Federal Reserve wishes to keep the federal funds
rate at its current level, then the appropriate action for the Federal Reserve
to take is a open market , everything else held constant.
A. defensive; sale
B. dynamic; sale
C. dynamic; purchase
D. defensive; purchase
open market purchase to defen a change in OP
18. In the market for reserves, an open market purchase the supply of
reserves and causes the federal funds interest rate to , everything
else held constant.
A. decreases; fall
B. increases; rise
C. increases; fall
D. decreases; rise
4. If float decreases to below its normal level, why might the manager of domestic
operations consider it more desirable to use repurchase agreements to affect the
monetary base, rather than an outright purchase of bonds?
6. “The federal funds rate can never be above the discount rate.” Is this statement true,
false, or uncertain? Explain your answer.
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15. Compare the methods of controlling the money supply—open market operations,
loans to financial institutions, and changes in reserve requirements—on the basis of
the following criteria: flexibility, reversibility, effectiveness, and speed of
implementation.
24. Why is it that a decrease in the discount rate does not normally lead to
an increase in borrowed reserves? Use the supply and demand analysis of the
market for reserves to explain.
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