The Federal Reserve: Conceptual Questions and Solutions

Intermediate Macroeconomics Problems and Solutions - Section 8

See Mr. Stolyarov's complete index of Intermediate Macroeconomics Problems and Solutions here.

Problem 36. Which of these are tools used by the Federal Reserve? That is, over which of these factors does the Fed have direct control?

(a) Federal funds rate (ffr)
(b) Reserve requirements
(c) Money supply
(d) Bank reserves
(e) Full employment
(f) Economic growth
(g) Discount Rate
(h) Open Market Operations (OMO)
(i) Balance of payments
(j) Price stability
(k) Interest rate
(l) Exchange rate
 (m) 90-day T-Bill rate

Solution 36. The three tools of the Fed are
(b): Reserve requirements
(g): Discount Rate
(h): Open Market Operations (OMO)

Problem 37. Which of these are instruments used by the Federal Reserve? That is, what do the tools of the Fed above most directly affect?

(a) Federal funds rate (ffr)
(b) Reserve requirements
(c) Money supply
(d) Bank reserves
(e) Full employment
(f) Economic growth
(g) Discount Rate
(h) Open Market Operations (OMO)
(i) Balance of payments
(j) Price stability
(k) Interest rate
(l) Exchange rate
(m) 90-day T-Bill rate

Solution 37. The instruments of the Fed are
(a): Federal funds rate (ffr)
(d): Bank reserves

Problem 38. Which of these are targets used by the Federal Reserve? That is, which of these does the Fed try to affect in an effort to reach its goals?

(a) Federal funds rate (ffr)
(b) Reserve requirements
(c) Money supply
(d) Bank reserves
(e) Full employment
(f) Economic growth
(g) Discount Rate
(h) Open Market Operations (OMO)
(i) Balance of payments
(j) Price stability
(k) Interest rate
(l) Exchange rate
(m) 90-day T-Bill rate

Solution 38. The targets of the Fed are

(c): Money supply
(k): Interest rate
(l): Exchange rate

Problem 39. Which of these are possible goals of a central bank? That is, which of these do central banks sometimes strive to ultimately accomplish?

(a) Federal funds rate (ffr)
(b) Reserve requirements
(c) Money supply
(d) Bank reserves
(e) Full employment
(f) Economic growth
(g) Discount Rate
(h) Open Market Operations (OMO)
(i) Balance of payments
(j) Price stability
(k) Interest rate
(l) Exchange rate
(m) 90-day T-Bill rate