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Question $26$

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In the post$-2008$ framework, the federal funds rate is controlled primarily by:

Question $26$Answer

a$.$

Reserve scarcity in the banking system

b$.$

Adjusting the discount rate daily

c$.$

Tools like IORB and ON RRP in a floor system

d$.$

Long$-$term asset purchases exclusively

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Question $27$

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Interest on Reserve Balances $($IORB$)$ introduced post$-2008$ is used to:

Question $27$Answer

a$.$

Encourage interbank lending

b$.$

Create a floor for the federal funds rate

c$.$

Increase reserve scarcity in the banking system

d$.$

Directly reduce unemployment

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Question $28$

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Under the Flexible Average Inflation Targeting $($FAIT$)$ framework introduced in $2020,$ how does the Federal Reserve treat periods of below$-$target inflation?

Question $28$Answer

a$.$

It ignores past deviations and focuses only on the present.

b$.$

It allows inflation to rise temporarily above $2\%$ to average out over time.

c$.$

It raises interest rates immediately to stabilize inflation.

d$.$

It tightens monetary policy to counteract low inflation.

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Question $29$

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The initial money demand is given by: MD $=2000-100*$ i and the money supply is: MS $=1200.$ If the central bank increases the money supply to: MS $=1400,$ and money demand shifts to: MD $=1800-100*$ i$,$ what is the new equilibrium interest rate?

Question $29$Answer

a$.$

$4\%$

b$.$

$5\%$

c$.$

$6\%$

d$.$

$7\%$