Which of the Following Policy Tools Is Directly Controlled by the Trading

question 209

Multiple Choice

Which of the following policy tools is directly controlled by the Trading Desk at the Federal Reserve Bank of New York?

• A) the spread between the discount rate and the federal funds rate
• B) the spread between the federal funds rate and the interest rate on banks' required reserves
• C) the required reserve ratio
• D) open market sales and purchases

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Definitions:

Purely Competitive

A market structure characterized by many buyers and sellers, with all firms selling identical products and no single buyer or seller able to influence the market price.

Imperfectly Competitive

Referring to market structures that do not meet the conditions of a perfect competition, often characterized by a small number of sellers, product differentiation, or barriers to entry.

MP

Member of Parliament; an elected official to the national legislative body in many countries.

Haircuts

A reduction applied to the value of assets for purposes of calculating capital requirements, risk, or losses.