Question

What does Yellen mean by saying that open double quotereserves were no longer relatively scarceclose double quote​? A. Reserves are so large that banks have little need to borrow reserves from other banks. B. Reserves are so large that banks can easily borrow reserves from other banks. C. Reserves are so large that banks have little need to increase the level of their depository accounts. D. Reserves are so large that banks can easily increase their lending activities. ​Why, with the monetary policy tools it had used prior to the financial​ crisis, could the Fed not control the federal funds​ rate? A. The Fed would have needed to conduct a massive open market purchase of government securities. B. Investor and consumer behavior was not conforming to normal patterns. C. Using the tools the Fed had available would have disrupted the financial system. D. Reserves would have needed to be increased by too large an amount. How was the Fed able to use its new monetary policy tools to increase the federal funds rate in December​ 2015? A. The Fed raised the rate it pays on excess reserves. B. The Fed raised the rate it pays on reverse purchase agreements. C. The Fed established a new federal funds rate. D. The Fed raised the rate it pays on excess reserves and reverse purchase agreements.

Answer 1

First question Option D. Reserves are so large that banks have little need to borrow reserves from other banks.

Second question. C. Using the tools the Fed had available would have disrupted the financial system.

3rd question. A. The Fed raised the rate it pays on excess reserves.

Step-by-step explanation:

1st question. The financial crisis revealed the need of increases reserved by banks. Now, banks have abundant reserves with the Fed so that they do not need to borrow reserves from other banks.

2nd question. With the monetary policy tools the Fed had prior to the financial crisis, the Fed could not control the feferal funds rate because investor and consumer behavior was not confirming to the normal pattern because of the housing crisis and decline in the funds rate was not leading to increase in investor confidence or consumer confidence and thus aggregate demand was not increasing.

3rd question. (To increase the federal funds rate, Fed raised the rate paid on excess reserves and reserve purchase agreements.)