With the onset of the recession in early 2001, the Federal Open Market Committee (FOMC) began to
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Question:
With the onset of the recession in early 2001, the Federal Open Market Committee (FOMC) began to reduce its targets for the federal funds rate, a process that continued through June 2003. Yet, beginning in late 2001, the growth of the money supply slowed dramatically for about 1 year despite the federal funds rate reductions.
1. Explain the FOMC's reasoning for reducing the federal funds rate.
2. Explain why the growth of the money supply would have slowed during this period of interest rate reductions?
3. Discuss the extent to which the FOMC be characterized as following an expansionary monetary policy ("easy money") during this period?
FOMC statements and Minutes can be found at http://www.federalreserve.gov/monetarypolicy/fomc.htm.
Expert Answer:
FOMC IMPLEMENTATION AND PROCEDURE AND PROBLEM INTRODUCTION FOMC which is an abbreviation of Federal Open Market Committee composed majorly of members which are twelve in number The federal committee i... View the full answer
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