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Chapter 15 All Materials PDF

Chapter 15 All Materials PDF - ECON 330 Money and Banking...

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ECON 330: Money and Banking Fall 2007 Section 1: Tuesday and Thursday, 11:30AM-12:45PM, SMU 104 Section 2: Tuesday and Thursday, 5:00PM-6:15PM, SRO B Prof. J. Santos South Dakota State University Student Learning Objectives: Chapter 15: Tools of Monetary Policy [1] Identify the factors that determine the position and slope of the demand curve for bank reserves. [2] Identify the factors that determine the position and slope of the supply curve for bank reserves. [3] Identify and de°ne the Federal Reserve±s three monetary policy tools. [4] Explain, in the context of the supply and demand model for reserves, how changes in these three tools a/ect the federal funds rate. [5] Identify and de°ne the two types of open market operations. [6] De°ne the term primary dealers. [7] De°ne, in the context of open market operations, the term outright transaction. [8] De°ne, in the context of open market operations, the term repurchase agreements. [9] Explain how primary dealers, and temporary (repo-based) and outright open market transactions work to bring about defensive and dynamic open market operations. [10] Identify and de°ne the three types of Fed discount loans to banks. [11] De°ne, in the context of the Federal Reserve System, the term lender of last resort. [12] Identify the advantages and disadvantages of the Fed±s three monetary policy tools.
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Chapter 15: Tools of Monetary Policy Econ 330: Money and Banking Fall 2007 Prof. Joseph Santos Department of Economics South Dakota State University This outline draws from Frederic Mishkin’s Money, Banking and Financial Markets (2007) and, as such, contains copy written material. Please do not quote without proper citation.
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[1] Demand for Bank Reserves The demand for reserves is comprised of depository institutions’ demand for required reserves plus their demand f [1] Demand for Bank Reserves [2] Supply of Bank Reserves [3] Reserve Market for excess reserves. As the federal funds rate decreases, the opportunity cost of holding excess reserves falls and, ceteris paribus, the quantity of reserves demanded rises [3] Reserve Market Equilibrium [4] Tools of the Fed [5] Open Market Operations [6] OMO – Reserve Market quantity of reserves demanded rises. Consequently, the demand curve for reserves slopes downward. Response [7] Discount Policy [8] DP – Reserve Market Response [9] Reserve Requirements [10] RR – Reserve Market Response Department of Economics South Dakota State University This outline draws from Frederic Mishkin’s Money, Banking and Financial Markets (2007) and, as such, contains copy written material. Please do not quote without proper citation.
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