Describe, in general terms, the strategy of monetary policy, explaining how monetary-policy tools are used to achieve the goals of monetary policy
What intermediate stages are important in going from tools to goals? What are the links between the different stages? How does the Federal Reserve use this strategy today?
The Fed uses its tools to influence intermediate targets that in turn affect the goal variables. The link between tools and intermediate targets is an economic relationship such as the money multiplier, which relates changes in the monetary base to changes in the money supply. The link between intermediate targets and the goal variables is an economic model. Today the Fed targets the Fed funds rate fairly directly, but watches many indicators to figure out the correct funds rate.
You might also like to view...
Greatest availability of a service to those who need it least is called
a. market system b. public provision c. adverse selection d. non-exclusion e. none of the above
Which of the following is true of unit banking?
a. It is the dominant form of banking in the United Sates. b. It occurs when national banks open interstate branch offices. c. It implies that every financial institution should maintain its account with the Federal Reserve. d. It occurs when a bank is not allowed to operate in more than one location. e. It refers to the monopolization of the banking industry.