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chp15 Flashcards

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1
Q

name the 3 conventional monetary policy tools (hint: dor)

A

discount leading
open market operations
reserve requirements

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2
Q

what do open market operations involve?

A

the buying and selling of government securities by the federal reserve

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3
Q

give 2 types of open market operations

A

dynamic
defensive

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4
Q

dynamic open market operations are actions with the intent of…

A

…affecting the monetary base and level of reserves

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5
Q

defensive open market operations are actions with the intent of…

A

…controlling effects on the monetary base and level of reserves

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6
Q

examples of defensive open market operations

A

float and change in Treasury deposits

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7
Q

how do federal reserves communicate with primary dealers

A

electronic system: TRAPS (trading room automated processing system)

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8
Q

describe TRAPS

A

secure and near instantaneous system for trading securities

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9
Q

types of defensive open market operations

A

repos
reverse repos

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10
Q

repos: aka…

A

…repurchase agreements

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11
Q

reverse repos: aka…

A

…matched sale purchase transactions

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12
Q

difference between repos and reverse repos

A

repos: temporary SALE of securities by federal reserve

reverse repos: temporary PURCHASE of securities by federal reserve

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13
Q

3 classifications of federal reserve bank credit

A

primary
secondary
seasonal

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14
Q

primary credit

A

overnight credit at discount rate with no limits, used when banks are “good standing”

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15
Q

secondary credit

A

credit issued to banks that are “riskier” and experiencing liquidity problems

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16
Q

seasonal credit

A

credit that occurs for banks that have periods of high transactions and low transaction, going in patterns (Ex: Cape Cod local banks)

17
Q

list nonconventional monetary policy tools (HINT: LANF)

A

liquidity provision
asset purchases (such as quantitative easing)
negative interest rates on bank deposits at a central bank
forward guidance

18
Q

quantitative easing

A

purchasing of long-term securities by the Federal Reserve to expand the balance sheet

19
Q

when has quantitative easing happened in the past?

A

2007/2008 financial crisis

20
Q

forward guidance

A

the idea that adjusting interest rates in the short-term would affect interest rates in the long-run; so if we lower short-term interest rates, then long-run interest rates as a product of expectations will also fall

Psychology (20 decks)

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