Purchase Solution

Federal Reserve

Not what you're looking for?

Ask Custom Question

1-Describe 3 ways in which the Federal Reserve can change the money supply.
2-If the Fedral Reserve is going to adjust all of these tools during an economy that is growing too quickly , what changes would they make?
3-If the Federal Resrve is going to adjust all of these tools during an economic recession ,what changes would they make?
4-What changes ,if any ,to the current condition of these tools would you make at the next meeting of the Fedral Reserve?Explain why and the benefits /drawbacks of this strategy.

Purchase this Solution
Solution Summary

Federal Reserve facets are noted.

Solution Preview

1.
The Fed can't control inflation or influence output and employment directly; instead, it affects them indirectly, mainly by raising or lowering short-term interest rates. The Fed affects interest rates mainly through open market operations and the discount rate, and both of these methods work through the market for bank reserves, known as the federal funds market.

So there are three tools:
open market operations
The major tool the Fed uses to affect the supply of reserves in the banking system is open market operations-that is, the Fed buys and sells government securities on the open market. These operations are conducted by the Federal Reserve Bank of New York.

discount rate
Banks also can borrow reserves from the Federal Reserve Banks at their "discount windows," and the interest rate they must pay on this borrowing is called the discount rate. The total quantity of discount window borrowing tends to be small, because the Fed discourages such borrowing except to meet occasional short-term ...

Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Important information about The Federal Reserve

    Reserve: The Federal Reserve System is a legal entity.

  • Federal Reserve

    So, non-financial companies could avail of credit direct from Federal Reserve. In addition, the Federal Reserve required Federal Reserve banks to pay interest on reserve balances help by depository institutions.

  • The Federal Reserve

    The Federal Reserve System The Federal Reserve Act of 1913, passed by the United States Congress, established the nation's central banking system-the Federal Reserve.

  • Federal Reserve and domestic money supply

    The changes in Federal Reserve assets cause equal changes in Federal Reserve liabilities. Any acquisition of an asset by the Federal Reserve results in a + change on the assets side of the balance sheet.

  • Measures recently employed by the Federal Reserve

    The tax system processes incoming and outgoing payments through a Federal Reserve checking account. The Federal Reserve also buys and sells government securities.

  • Federal Reserve

    This rate is also effected when the Federal Reserve sells securities. Finally, this rate is also affected when the Federal Reserve increases the reserve ratio.

  • Federal Reserve

    Federal Reserve What does the Federal Reserve take into account when establishing general and specific rates of interest?

  • The Federal Reserve Bank's obstacles

    345773 The Federal Reserve Bank's obstacles What keeps the Federal Reserve from being able to achieve its goals, and in what ways?

  • Explain which of these interest rates the Federal Reserve se

    The discount rate is set by the federal reserve.

  • The Federal Reserve System

    The Federal Reserve System is composed of the Federal Reserve Board also known as the Board of Governors(its members are appointed by the President), the Federal Open Market Committee, twelve regional Federal Reserve banks located in major cities throughout

View More Related Solutions