Econ HW 6B
1)What are the macroeconomic trends that did prompt the FOMC to end the QE III but to keep
the federal fund rate still at its historic low? You need to give reasons for both of these policy
2) Draw a supply-demand diagram of the Federal funds market which illustrates the effects of a
massive treasury bill sale by the Fed in the open market.
3) If banks desire to increase their lending, but the Federal Reserve is not adding reserves to
the banking system, what will happen to the level of short term interest rates? Explain your