Describe exactly how the change in the federal funds rate

Assignment Help Microeconomics

Reference no: EM13453378

The Federal Reserve "controls the three tools of monetary policy-open market operations, the discount rate, and the reserve requirements."

The Federal Reserve influences the demand for and supply of balances that depository institutions hold at the Federal Reserve Banks, and in this way, it alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.

Changes in the federal funds rate impact a ripple effect that affect the following:

Other short-term interest rates
Foreign exchange rates
Long-term interest rates
The amount of money and credit in the system
Employment
Output
Prices of goods and services (i.e., inflation)
Investment

From your knowledge of the financial system, the demand for money, banking and the money supply, the stock market, interest and spending, interest and investment, how money moves, and how monetary policy affects aggregate supply and demand and inflation, explain exactly how a change in the federal funds rate can affect all these reactions. Use at least 4 graphs. Do you think we are in a liquidity trap today? Why or why not?

Reference no: EM13453378

Questions Cloud

Accounts receivable appear in the balance : accounts receivable appear in the balance sheeta as current assets immediately after cash and cash equivalents.b only

What will the ramifications of this war be for both iraq : now that us troops have exited iraq it is time to assess the overall effectiveness of the war as well as try to predict

Describe the role that dichotomous black-and-white thinking : respond to the following1.identify two 2 social pressures that interfere with your success in academic pursuits.

Contrast the differences in technical versus economic : q1 contrast the differences in technical versus economic efficiency with respect to the provision of medical services.

Describe exactly how the change in the federal funds rate : thenbspfederal reserve controls the three tools of monetary policy-open market operations the discount rate and the

The purpose of this paper is for you to demonstrate your : the purpose of this paper is for you to demonstrate your ability to apply a working knowledge of the theories

Identify and explain at least three aspects of wu wei : actionless action daosim and the practice of virtue confucianism please respond to the followingidentify and explain

Specify the nature structure types of products or service : according to the textbook the current world economy is increasingly becoming integrated and interdependent as a result

For example if allison is not obviously physically impaired : pets and mris also can diagnose head injuries. consider the following scenarioyou are working at a veterans affairs va

User Account

All Pages