Reading 64: Understanding Yield Spreads-LOS a 习题精选 discount, love

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Session 15: Fixed Income: Basic Concepts
Reading 64: Understanding Yield Spreads

LOS a: Identify the interest rate policy tools available to a central bank (e.g., the U.S. Federal Reserve).

 

 

If the Federal Reserve wishes to lower market interest rates without changing the discount rate, it can:

A) buy Treasury securities.

B) raise the yield on Treasury securities.

C) increase bank reserve requirements.

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Buying Treasury securities pumps money into the economy, lowering interest rates. Higher reserve requirements will restrict the money supply, causing rates to rise. The Federal Reserve has no direct control over the yield on existing Treasury securities.

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Which of the following are the two most important tools available to the Federal Reserve?

A) Changing the discount rate and open market operations.

B) Changing the discount rate and changing bank reserve requirements.

C) Open market operations and changing bank reserve requirements.

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The two most important tools available to the Fed are changing the discount rate, the rate at which banks can borrow from the Fed’s discount window, and open market operations, the Fed’s activity of buying and selling Treasury securities.

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Which of the following policy tools is the least likely to be available to the U.S. Federal Reserve Board?

A) Requiring the banking system to tighten or loosen its credit policies.

B) Buying and selling Treasury securities in the open market.

C) Setting the discount rate at which banks can borrow from the Federal Reserve.

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The U.S. Federal Reserve can encourage or persuade banks as a whole to tighten or loosen their credit policies, but it cannot compel them to do so.