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ECON 2035 Test 3 Study Guide

ECON 2035 Test 3 Study Guide - ECON 2035 Test 3 Study Guide...

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ECON 2035 Test 3 Study Guide HISTORY National Banking Act of 1863 created the Office of the Comptroller of Currency. Black Monday in October of 1987 was avoided when Fed announced it would give discount loans to banks that loaned to the security industry. The Fed accidentally discovered open market operations in the early 1920’s. Fluctuations in money supply growth and the FFR from 1979-1982 suggests the Fed never intended to target monetary aggregates. The Charter of the First Bank of the U.S. was not renewed b/c Congress didn’t renew the charter by a single vote. The Fed’s mistakes of the early 30’s were compounded by it raising reserve requirements in 1936-37. Nationwide financial panics in the 19 th and early 20 th century might have been avoided if the Second Bank of the US hadn’t been abolished by Jackson in 1836. In practice, the Fed’s policy of targeting money market conditions in the 1960’s proved to be procyclical, destabilizing the economy. During WWII, the Fed relinquished its control of monetary policy by pegging interest rates. The Bank of England, founded in 1694, is the oldest central bank. Early U.S. political conflicts centered around differences between rural values and urban reality. The Fed’s guiding principle in the early years was real bills doctrine.
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FEDERAL RESERVE If a member of the public sells gov. bond to FR with currency, the monetary base will rise and reserves will remain unchanged.
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