Funds rate by manipulating three tools of monetary policy

Assignment Help Financial Management

Reference no: EM131887355

1) Federal Reserve Bank (FED) lowered the target for federal funds rate from 5.25% in June 2006 to 0-.25% in December 2008, and the target has remained at this level since then. Discount rate (i.e., primary credit rate) declined from 6.25% in June 2006 to .75 % in February 2010, and it has remained at this level ever since. FED in June 2006 was deeply concerned that housing bubble burst would have a devastating effect on the economy.

A) Although Fed cannot exert direct control over the federal funds rate, it can indirectly influence the level of federal funds rate by manipulating three tools of monetary policy. Explain how Fed can decrease the federal funds rate via these three instruments.

B) Also predict and explain the effects of such policy on the U.S. interest rates (both short-term and long-term), consumption spending, business spending, net export, aggregate output (GDP) and inflation rate.

Reference no: EM131887355

Questions Cloud

What math class or classes will you take for your major : What math class or classes will you take for your major? How can math be used in your career? How can math be used in your daily life?

Explain the principles and functions of x-rays : Explain the principles and functions of X-RAYS, GAMMA CAMERAS, ULTRASOUND, LASERS,MRI as they relate to the human body.

How you can intervene in the changed situation : How could this important factor change in relation to the age of the child or the socio-economic status of the child?

Find the point on the x-axis : A Q1 = +2.0 nC point charge and a Q2 = -4.0 nC point charge are 5.0 cm apart on the x-axis. Find the point on the x-axis where the electric field is zero.

Funds rate by manipulating three tools of monetary policy : it can indirectly influence the level of federal funds rate by manipulating three tools of monetary policy.

How long does it take for the sound to reach you : You are at a concert, sitting 90 yards from the stage. The temperature is 20°C. A friend is watching the concert on television, and they are 1200 miles away.

Examine the type of training or education that is required : Examine the type of training or education that is required. Discuss whether a license or certification is required to practice this therapy.

How your biggest influence aligns with the research : Explain how your biggest influence aligns with the research. Incorporate information from at least two academic sources to support your statements and ideas.

Proportion of your budget should be invested in risky fund : What proportion of your budget should be invested in the risky fund?

User Account

All Pages