Explain the Fed’s three tools of monetary policy…

Explain the Fed’s three tools of monetary policy and how each is used to change the money supply. Does each tool affect the monetary base or the money multiplier?
State whether the following statement is true or false AND explain why: “A decrease in the discount rate will always cause a decrease in the federal reserve funds rate.”
Explain dynamic and defensive open market operations. What is the purpose of each type? Describe two situations when defensive open market operations are used. How are defensive open market operations typically conducted?
Explain what inflation targeting is. What are the advantages and disadvantages of this type of monetary policy strategy?
Explain and demonstrate graphically how targeting nonborrowed reserves can result in federal funds rate instability.
? Discussion write-up
Discussions are an important part of the class. There is a final “paper” due. I would like your
assessment (one paragraph each) of the two postings you found most interesting – these can be either
individual postings (not your own), or threads of postings. Why did you find them useful?

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  • Search the internet for a current yield curve. (Cite or link your source) What inflationary expectation does this seem to suggest? Does this match or oppose commentary in the popular press? Why? What do you suppose are some of the driving factors?
  • Discuss the pros and cons of the Treasury Asset Relief Plan (TARP). What was the purpose? Are there other approaches that might have been effective?

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Homework 7 – ECO315-810

Explain the Fed’s three tools of monetary policy and how each is used to change the money supply. Does each tool affect the monetary base or the money multiplier?

State whether the following statement is true or false AND explain why: “A decrease in the discount rate will always cause a decrease in the federal reserve funds rate.”

Explain dynamic and defensive open market operations. What is the purpose of each type? Describe two situations when defensive open market operations are used. How are defensive open market operations typically conducted?

Explain what inflation targeting is. What are the advantages and disadvantages of this type of monetary policy strategy?

Explain and demonstrate graphically how targeting nonborrowed reserves can result in federal funds rate instability.

? Discussion write-up
Discussions are an important part of the class. There is a final “paper” due. I would like your
assessment (one paragraph each) of the two postings you found most interesting – these can be either
individual postings (not your own), or threads of postings. Why did you find them useful?

Search the internet for a current yield curve. (Cite or link your source) What inflationary expectation does this seem to suggest? Does this match or oppose commentary in the popular press? Why? What do you suppose are some of the driving factors?

Discuss the pros and cons of the Treasury Asset Relief Plan (TARP). What was the purpose? Are there other approaches that might have been effective?

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