4******************* 4)Why did the Financial Crisis and the Great Recession cause the FED to alter its monetary policy from using open market operations to target the federal funds rate to establishing a corridor between the IOER and the discount rate through which the federal funds rate would move over time?

4******************* 4)Why did the Financial Crisis and the Great Recession cause the FED to alter its monetary policy from using open market operations to target the federal funds rate to establishing a corridor between the IOER and the discount rate through which the federal funds rate would move over time?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter15: Monetary Theory And Policy

Section: Chapter Questions

Problem 4.9P

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1 **************** 1) Consider the US Federal Reserve System and compare it with another central bank in a major country, such as the Bank of England, the European Central Bank, the Bank of Japan, the Reserve Bank of India, etc. a)What are two features, characteristics, or practices of the second central bank that you chose to compare with the FED that are very similar to the FED? b)What are two features of that central bank that differ significantly from the FED? Explain. P.S. CHOOSE BANK OF JAPAN
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When economists speak of the "zero lower bound problem" that the Fed sometimes faces, what are they referring to? 1. It is when short term interest rates are close to zero meaning the Fed can no longer use changes in interest rates to stimulate the economy 2. It is when economic growth in the economy has reached zero percent and the Fed must use aggressive monetary policy 3. It is when the Fed has sold all the securities on its balance sheet and can no longer impact the money supply using open market operations 4. It is when banks choose to hold no excess reserves, making it impossible for the Fed to lower the discount rate
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The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks occasionally borrow from the Federal Reserve when they find themselves short on reserves. A lower discount rate____________(increases/decreases) banks' incentive to borrow reserves from the Federal Reserve, thereby __________( increasing / decreasing) the quantity of reserves in the banking system and causing the money supply to _______(rise/ fall) .
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