Homework203__11(f09)-1

Homework203__11(f09)-1 - Economics 203 Homework #11 Due:...

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Economics 203 Course ID_________________ Homework #11 Section #__________________ Due: Thursday, December 3 rd (in class!) 1. The following excerpt is taken from “Fed Chief Dims Hopes for a Rate Cut,” by Jeremy W. Peters, NY Times Online , June 6, 2007. The Fed walks a tightrope of sorts in making monetary policy. It must constantly monitor inflation and set policy that keeps it in an acceptable range. For the Fed that range is no more than 1 to 2 percent inflation. If the Fed feels the economy is heating up to a point that will cause unacceptable inflation it will engage in a tight money policy. Open market operations, carried out by the Federal Open Market Committee (FOMC), are used to control inflation. Most analysts have been expecting an interest rate cut before the end of the year. This would require the Fed to purchase securities in the open market which will increase the reserves in the banking system and lower interest rates. This is referred to as easy money policy. The benchmark rate is the Federal Funds Rate. This is the interest rate commercial banks charge
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Homework203__11(f09)-1 - Economics 203 Homework #11 Due:...

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