ECON202 AMPLE RESERVES

How did we end up with ample reserves in the banking system?

What are the 2 key administered rates that the FED now uses to drive the Fed Funds Rate into the target range?

Can you explain how the FED’s use of 3 administered rates changes the shape of the Demand curve for reserves?

Can you explain how the FED changing its administrative rates will naturally change the reservation rate for banks and lead to arbitrage that will drive the FFR into the new target range?

How does monetary policy influence the economy?  You should be able to graph and explain this transmission mechanism for both the limited and ample frameworks.

How can expansionary monetary policy be used to close a recessionary gap?

Is monetary policy useful for managing inflationary pressure?

Are there reasons to prefer monetary policy to fiscal policy?  What about fiscal over monetary?

Is it possible to target the money supply and the interest rate simultaneously?

What is the Quantity Theory of Money? Does this mean that monetary policy is useless?