ECON 2035: Exam 3-Ch. 13 Terms
Questions and Correct Answers.
Conventional Monetary Policy Tools - Answer three tools of monetary policy (open market
operations, discount lending, and reserve requirements) the the Federal Reserve uses, during
normal times, to control the money supply and interest rates
Credit Easing - Answer altering the composition of the Fed's balance sheet in order to
improve the functioning of particular segments of the credit markets
Defensive Open Market Operations - Answer one type of open market operations that is
intended to offset movements in other factors that affect reserves and the monetary base, such
as changes in Treasury deposits with the Fed or changes in float.
Deposit Facility - Answer a standing facility in which banks are paid a fixed interest rate that
is 100 basis points below the target financing rate
Discount Window - Answer the facility at which banks can borrow reserves from the Federal
Reserve
Dynamic Open Market Operations - Answer one type of open market operations that is
intended to change the lever of reserves and the monetary base.
Federal Funds Rate - Answer the interest rate on overnight loans of reserves from one bank
to another
Lender of Last Resort - Answer When the Federal Reserve System was created, its most
important role was intended to be as the _____________________________; to prevent bank
failures from spinning out of control, it was to provide reserves to banks when no one else
would, thereby preventing bank and financial panics.
Longer-Term Refinancing Operations - Answer a much smaller source of liquidity for the euro
area banking system and are similar to the Fed's outright purchases or sales of securities; these
are carried out monthly and typically involve purchases or sales of securities w/ a maturity of 3
months.
Main Refinancing Operations - Answer the predominant form of open market operations and
are similar to the Fed's repo transactions; they involve weekly reverse transactions that are
reversed w/i two weeks
Questions and Correct Answers.
Conventional Monetary Policy Tools - Answer three tools of monetary policy (open market
operations, discount lending, and reserve requirements) the the Federal Reserve uses, during
normal times, to control the money supply and interest rates
Credit Easing - Answer altering the composition of the Fed's balance sheet in order to
improve the functioning of particular segments of the credit markets
Defensive Open Market Operations - Answer one type of open market operations that is
intended to offset movements in other factors that affect reserves and the monetary base, such
as changes in Treasury deposits with the Fed or changes in float.
Deposit Facility - Answer a standing facility in which banks are paid a fixed interest rate that
is 100 basis points below the target financing rate
Discount Window - Answer the facility at which banks can borrow reserves from the Federal
Reserve
Dynamic Open Market Operations - Answer one type of open market operations that is
intended to change the lever of reserves and the monetary base.
Federal Funds Rate - Answer the interest rate on overnight loans of reserves from one bank
to another
Lender of Last Resort - Answer When the Federal Reserve System was created, its most
important role was intended to be as the _____________________________; to prevent bank
failures from spinning out of control, it was to provide reserves to banks when no one else
would, thereby preventing bank and financial panics.
Longer-Term Refinancing Operations - Answer a much smaller source of liquidity for the euro
area banking system and are similar to the Fed's outright purchases or sales of securities; these
are carried out monthly and typically involve purchases or sales of securities w/ a maturity of 3
months.
Main Refinancing Operations - Answer the predominant form of open market operations and
are similar to the Fed's repo transactions; they involve weekly reverse transactions that are
reversed w/i two weeks
