Describe how the Fed uses open market operations to change short-term and long-term interest rates
What will be an ideal response?
The Fed tries to achieve a target level for the federal funds rate by using open market operations. If it wants to lower the federal funds rate, it will buy Treasury bills using open market operations. This purchase will inject the banking system with reserves. The increased supply of reserves will lower the overnight loan rate on these reserves, which is called the federal funds rate. Changes in the federal funds rate will usually result in changes in the interest rates on other short-term financial assets such as Treasury bills, and eventually affect longer-term rates such as the rate of corporate bonds and mortgages. However, the effect on these longer-term rates is usually smaller than the impact on short-term rates and occurs with a lag.
You might also like to view...
The rocketing prices of imported oil in 1973-1974 and again in 1979-1990 are good exampled of what type of inflation?
What will be an ideal response?
This form of promotion offers temporary inducements to buy a product or service:
Advertising Publicity Sales promotion Personal selling
Thomas Hobbes argued for a tax on consumption instead of on income because
A. the standard of living depends not on income, but on how much income is spent. B. a tax on consumption raises more revenue than a tax on income. C. a tax on income discourages saving by taxing savings twice. D. consumption is the best indication of ability to pay.
The term "unemployment" is best described as the total number of
A) adults who are looking for work but have not found a job. B) people not working. C) adults who work fewer hours than they wish to work. D) people who have been laid off and have stopped looking for work.