3. For each part, start by supposing the Federal Reserve current has a discount rate of...
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3. For each part, start by supposing the Federal Reserve current has a discount rate of 6% and the equilibrium federal funds rate is 5%, and the Fed pays 5% on excess reserves. Also, assume that there are currently SOB borrowed reserves. a) Using a supply and demand diagram show the effects of an open market purchase and briefly explain the effect on the federal funds rate, non-borrowed reserves, and borrowed reserves (up/down/stay the same). Be sure to label your diagram. b) Using a supply and demand diagram show the effects of an decrease in the discount rate from 6% to 5.5% and briefly explain the effect on the federal funds rate, non-borrowed reserves, and borrowed reserves (up/down/stay the same). Be sure to label your diagram. c) Using a supply and demand diagram show the effects of an decrease in the reserve-requirement and briefly explain the effect on the federal funds rate, non-borrowed reserves, and borrowed reserves (up/down/stay the same). Be sure to label your diagram. 3. For each part, start by supposing the Federal Reserve current has a discount rate of 6% and the equilibrium federal funds rate is 5%, and the Fed pays 5% on excess reserves. Also, assume that there are currently SOB borrowed reserves. a) Using a supply and demand diagram show the effects of an open market purchase and briefly explain the effect on the federal funds rate, non-borrowed reserves, and borrowed reserves (up/down/stay the same). Be sure to label your diagram. b) Using a supply and demand diagram show the effects of an decrease in the discount rate from 6% to 5.5% and briefly explain the effect on the federal funds rate, non-borrowed reserves, and borrowed reserves (up/down/stay the same). Be sure to label your diagram. c) Using a supply and demand diagram show the effects of an decrease in the reserve-requirement and briefly explain the effect on the federal funds rate, non-borrowed reserves, and borrowed reserves (up/down/stay the same). Be sure to label your diagram.
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a Open Market Purchase The Federal Reserve conducts an open market purchase by buying government sec... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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