Understanding the Fed's New Monetary Policy Tools

Front

What is the primary tool the Fed uses to adjust the federal funds rate in the ample reserves framework?

Back

Interest on reserves (IOR)

Front

How did the Great Financial Crisis of 2007-09 affect the Fed's monetary policy tools? Options: It led to the elimination of the federal funds rate, It resulted in the introduction of the ample reserves framework, It reduced the importance of the discount rate, It increased the reliance on open market operations

Back

It resulted in the introduction of the ample reserves framework

Front

What happens if the federal funds rate falls below the interest on reserves (IOR) rate?

Back

Banks can borrow at the FFR and deposit at the Fed to earn a profit

Front

Which of the following is NOT a new tool used by the Fed in the ample reserves framework? Overnight reverse repurchase agreement (ON RRP) rate, Discount rate, Interest on reserves (IOR)

Back

Reserve requirements

Front

What is the purpose of the Fed's administered rates in the ample reserves framework?

Back

To guide the federal funds rate within the FOMC’s target range

Front

What is the effect of the Fed lowering its administered rates during an economic downturn?

Back

It encourages market interest rates to decline

Front

Which statement best describes the role of open market operations in the ample reserves framework?

Back

They ensure that the level of reserves remains ample

Front

The interest that the Fed charges banks to borrow money.

Back

The Discount Rate

Front

Who runs the FED?

Back

A board of governors