Why did PIMCO’s view that unemployment would stay high and inflation low lead to a
forecast that policy interest rates would remain low for an extended period?
Why would low policy rates suggest low long-term interest rates?
What might have caused long-term interest rates to rise in late 2010, even though the
federal funds rate was still zero?
Q416: Show the changes to the T-accounts for the Federal Reserve
and for commercial banks when the Federal Reserve buys
$50 million in U.S. Treasury bills. If the public holds a
fixed amount of currency (so that all loans create an equal
amount of deposits in the banking system), the minimum
reserve ratio is 10%, and banks hold no excess reserves, by
how much will deposits in the commercial banks change?
By how much will the money supply change? Show the
final changes to the T-account for commercial banks when
the money supply changes by this amount.