Exploring the Ample Reserve Framework in Monetary Policy

The video explains the Federal Reserve's shift in monetary policy framework from a limited to an ample reserve system post-2008. It details how reserves function as assets for commercial banks and liabilities for the Fed. The video discusses the impact of this shift on the federal funds rate and the transition from open market operations to administered interest rates as the primary policy tool. The Fed's current approach to managing interest rates through administered rates like the interest on reserve balances and the overnight reverse repurchase agreement is also covered.

What are reserve balances considered for commercial banks?

• Fixed deposits

• Assets

• Non-performing assets

• Liabilities

What significant policy shift did the Fed make in 2008?

• Eliminated the federal funds rate

• Shifted from a limited Reserve policy to an ample Reserve policy

• Introduced cryptocurrency regulations

• Transitioned to a gold standard

By how much did reserve balances increase from 2008 to 2014?

• Over 300x

• Over 200x

• Over 100x

• Over 50x

What was the Fed's primary monetary policy tool before 2008?

• Quantitative easing

• Interest on reserve balances

• Open market operations

• Discount rate adjustments

What happened to the federal funds rate as a result of the policy shift?

• It was eliminated

• It became the only rate banks cared about

• Its determination method changed

• It remained unchanged

Why did open market operations become less effective after 2008?

• Because of the shift to a gold standard

• Due to the ample supply of reserves

• Due to the introduction of cryptocurrency

• Because of international regulations

What is now considered the Fed's number one policy tool?

• Federal funds rate

• Open market operations

• Interest on reserve balances

• Discount rate

What purpose do administered interest rates serve in the current policy framework?

• To influence the federal funds rate

• To eliminate the need for reserves

• To regulate cryptocurrency

• To adjust the supply of gold reserves

What are the two types of administered interest rates mentioned?

• Open market operations rate and quantitative easing rate

• Cryptocurrency rate and gold reserve rate

• Interest on reserve balances and overnight reverse repurchase agreement rate

• Discount rate and federal funds rate

How does the Fed currently influence the demand for reserves?

• By changing the price of gold

• Through cryptocurrency investments

• By adjusting administered interest rates

• By direct regulation of commercial banks