Tools Of The US Monetary Policy Flashcards
The Fed can control inflation and influence employment ____________.
Indirectly
The Fed controls inflation and employment indirectly by raising or lowering the short term interest rate called what?
Federal funds rate
When banks keep a certain amount of funds in reserves to meet unexpected outflows it’s called a what?
Bank reserve
Banks are _________ to hold a certain amount of funds I reserves.
Required
When banks borrow from banks to fill reserves they take loans from a private financial market called what?
Federal funds market
The interest rate on the overnight borrowing of reserves is called the what?
Federal funds rate
The major tool the Fed uses to affect the supply of reserves is what?
Open market operations
In open market operations the Fed buys and sells __________ _________ on the open market.
Government securities
The Fed buys government securities to _________ the federal fund rate.
Lower
The Fed sells government securities to _________ the federal fund rate.
Raise
The discount rate is the rate banks must pay to borrow reserves from whom?
Federal Reserve Bank
The process of keeping intervention from affecting reserves and the fund rate is called the “___________” of exchange market operations.
Sterilization
