Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 16: Q.16.5 Learning Objectives (page 349)

Explain how the Federal Reserve has implemented a credit policy since 2008.

Short Answer

Expert verified

Federal Reserve has implemented the following credit policies- term securities lending facilities, primary dealer credit facility, and term auction facility.

Step by step solution

01

introduction

Federal Reserve has made various policies like helping the liquidity of monetary establishments and cultivating further developed conditions in monetary business sectors.

02

explanation

Term securities lending facilities were begun by Federal Reserve to assuage liquidity tension in the credit market. It is a loaning office which was presented by the Federal Reserve.

Primary dealer credit facility, The essential seller credit office was laid out to energize the viable working of the monetary market. Essential vendors have a place with a predefined rundown of monetary organizations that are fundamental pieces of the U.S. economy.

Term auction facility is a transitory program by the Federal Reserve to increment liquidity in credit markets of the U.S. Under this program, the Federal Reserve barters a set measure of guarantee supported momentary credits to such safe foundations which are in a strong monetary position.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Imagine working at the Trading Desk at the New York Fed. Explain whether you would conduct open market purchases or sales in response to each of the following events. Justify your recommendation.

a. The latest FOMC Directive calls for an increase in the target value of the federal funds rate.

b. For a reason unrelated to monetary policy, the Fed's Board of Governors has decided to raise the differential between the discount rate and the federal funds rate. Nevertheless, the FOMC Directive calls for maintaining the present federal funds rate target.

Suppose that the quantity of money in circulation is fixed but the income velocity of money doubles. If real GDP remains at its long-run potential level, what happens to the equilibrium price level?

Describe how Federal Reserve monetary policy actions influence market interest rates

You learned in an earlier chapter that if a recessionary gap occurs in the short run, then in the long run a new equilibrium arises when input prices and expectations adjust downward, causing the short-run aggregate supply curve to shift downward and to the right and pushing equilibrium real GDP per year back to its long-run value. In this chapter, you learned that the Federal Reserve can eliminate a recessionary gap in the short run by undertaking a policy action that increases aggregate demand.

a. Propose one monetary policy action that could eliminate the recessionary gap in the short run.

b. In what way might society gain if the Fed implements the policy you have proposed instead of simply permitting long-run adjustments to take place?

You learned in an earlier chapter that if there is an inflationary gap in the short run, then in the long run a new equilibrium arises when input prices and expectations adjust upward, causing the short-run aggregate supply curve to shift upward and to the left and pushing equilibrium real GDP per year back to its long-run value. In this chapter, however, you learned that the Federal Reserve can eliminate an inflationary gap in the short run by undertaking a policy action that reduces aggregate demand.

a. Propose one monetary policy action that could eliminate an inflationary gap in the short run.

b. In what way might society gain if the Fed implements the policy you have proposed instead of simply permitting long-run adjustments to take place?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free