1) If the Fed wants to do easy money policy, it can a. increase reserve requirements...
1) If the Fed wants to do easy money policy, it can
a. increase reserve requirements
b. buy bonds from banks
c. sell bonds in the open market
d. raise the discount rate
2) The Lombard method:
a. is a method for the Fed loaning reserves to banks
b. is described accurately by all listed options
c. put the rate on federal funds above the rate on discount loans
d. has not been used since 2003
Homework Answers
1) option B is correct. This will infuse money in the banking system which will then be used to create money. As a result there will be an increase in money supply, which is is also known as easy monetary policy
2) option A is correct. while it is true that it was used by the federal reserve in providing loans, the rate of discount was considered lower than the rate of federal funds due to which interbanking lending became controversial.
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1) If the Fed wants to do easy money policy, it can
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