Gen Ed - 1. What is the basic structure of the Federal...

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1. What is the basic structure of the Federal Reserve, and what is meant by an “an independent fed? Describe why many economists, especially Fed economists, treasure this independence.” 2. Where are the regional banks of the FED? List them. Which regional bank is responsible for State College, PA? 3. What is the FOMC? List the names of the voting members and describe the process as to who exactly gets to vote at these meetings .Who is chair of this committee? Why is the FOMC important? What do they discuss and when and how often do they meet (give the dates of the next four meetings)?. 4. Who are the presidents of the regional banks, and what is their connection to the FOMC (list them and their respective regional banks)? 5. What is the Board of Governors, who is on it, and what is its connection to the FOMC? 6. What is the Beige Book, how often is it published and why is it important? 7. What is meant by the terms “hawkish” and “dovish?” Have the recent actions by the Fed been hawkish or dovish? Explain. 8. What is meant by a fractional reserve banking system? 9. Describe the process by which the Federal Funds Rate is maintained. The federal funds rate is controlled by the Federal Open Market Committee (FOMC). The rate is “charged by one depository institution [banks] on an overnight sale to another institution”. The FOMC sets the optimal target rate and use monetary policy in order to obtain that rate (mostly through the use of open market operations and discount window lending). The FOMC meets in order to discuss changes to the federal funds rate. A decrease in rate may lead to economic growth, but could also lead to inflationary prices. A rise in the rate slows down growth but usually limits the amount of inflation on the market. 10. What are open market operations and how are they connected to the federal funds rate? Open market operations are the primary tool used by the Federal Reserve to implement monetary policy. Open market operations is the buying and selling of federal securities. The purchase and sales of U.S. Treasury and federal securities determine the federal funds rate. Open market operations are the largest factor in changing the federal funds rate. The amount the rate increases or decreases is determined by the amount of securities that are bought and sold. 11. Draw a graph of the market for overnight reserves and depict and describe the recent 9/18/07 action by the FOMC. What determines how successful the Fed is in terms of achieving their target for the federal funds rate? On September 18, 2007, the FOMC decreased the intended federal funds rate for the first time since
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This note was uploaded on 03/30/2008 for the course ECON 004 taught by Professor Graf,pauledwin during the Spring '07 term at Pennsylvania State University, University Park.

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Gen Ed - 1. What is the basic structure of the Federal...

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