Federal Reserve Board | My Assignment Tutor

It was noted in the text that the Federal Reserve purchased, in addition to Treasury bills, large amounts of mortgage-backed securities and long-term government bonds as part of quantitative easing. Figure23-2 shows that as of the end of 2015, there were about 4.5 trillion dollars of assets in the monetary base. These assets were roughly distributed as 0.2 trillion in Treasury securities with less than one year to maturity; 2.2 trillion in Treasury securities of more than one year to maturity; and 1.7 trillion in mortgage-backed securities. a. Why did the Federal Reserve Board buy the mortgage-backed securities? b. Why did the Federal Reserve Board buy the long-term Treasury bonds? c. What would you predict as the consequences of the following operation by the Federal Reserve Board: selling 0.5 trillion in mortgage-backed securities and buying 0.5 trillion in Treasury securities with less than one year to maturity? d. What would you predict as the consequences of the following operation by the Federal Reserve Board: selling 0.5 trillion in Treasury securities with maturity longer than one-year and buying 0.5 trillion in Treasury securities with less than one year to maturity?

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