(Solution) 15-16. The Federal Reserve Purchases $1 Million In U. Treasury Bonds From A Bond Dealer, And The Dealer's Bank Credits The Dealer's Account. The... | Snapessays.com


(Solution) 15-16. The Federal Reserve purchases $1 million in U. Treasury bonds from a bond dealer, and the dealer's bank credits the dealer's account. The...


15-16. The Federal Reserve purchases $1 million in U.S.Treasury bonds from a bond dealer, and thedealer’s bank credits the dealer’s account. Thereserve ratio is 15 percent. Assuming that no currencyleakage occurs, how much will the banklend to its customers following the Fed’s purchase?(See pages 333–334.)16-8. Suppose that the quantity of money in circulationis fixed but the income velocity of money doubles.If real GDP remains at its long-run potentiallevel, what happens to the equilibrium pricelevel? (See page 354.)16-12. Assuming that the Fed judges inflation to be themost significant problem in the economy and thatit wishes to employ all of its policy instrumentsexcept interest on reserves, what should the Feddo with its three policy tools? (See page 357.)16-14. Imagine working at the Trading Desk at the NewYork Fed. Explain whether you would conductopen market purchases or sales in response toeach of the following events. Justify your recommendation.(See page 353.)a. The latest FOMC Directive calls for an increasein the target value of the federal funds rate.b. For a reason unrelated to monetary policy, theFed’s Board of Governors has decided to raisethe differential between the discount rate andthe federal funds rate. Nevertheless, the FOMCDirective calls for maintaining the present federalfunds rate target.

 


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