Questions from Financial Markets


Q: Explain how the Federal Reserve’s conduct of an expansionary open market operation

Explain how the Federal Reserve’s conduct of an expansionary open market operation affects the monetary base.

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Q: Explain why the Federal Reserve has more control over the monetary base

Explain why the Federal Reserve has more control over the monetary base when it uses open market operations than when it uses discount window lending.

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Q: Which of the following are included in the monetary base?

Which of the following are included in the monetary base?

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Q: Critics of the Bank of Japan argue that it played a role

Critics of the Bank of Japan argue that it played a role in the global financial crisis. What do these critics argue?

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Q: If bank depositors hold more cash and fewer deposits, the monetary

If bank depositors hold more cash and fewer deposits, the monetary base does not change, only the composition of it does. Explain why.

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Q: Explain how changes in the Treasury’s tax and loan account balance may

Explain how changes in the Treasury’s tax and loan account balance may affect the monetary base. “tax and loan accounts,” at commercial banks across the country.

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Q: If US Treasury and administration officials decide they want to see the

If US Treasury and administration officials decide they want to see the dollar rise in value against the euro, what will happen to the monetary base?

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Q: Explain why (just mathematically) if people hold relatively more cash

Explain why (just mathematically) if people hold relatively more cash—that is, the currency ratio k increases—the money supply multiplier gets smaller.

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Q: You read in the press that a credit crunch is occurring.

You read in the press that a credit crunch is occurring. How will that affect the money supply multiplier and why?

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Q: If a central bank wants to pursue an expansionary monetary policy,

If a central bank wants to pursue an expansionary monetary policy, it should change policies to ensure what happens to the required reserves ratio?

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