Author Question: The Federal Open Market Committee (FOMC) is the group within the Federal Reserve that makes monetary ... (Read 109 times)

burchfield96 · **on:** Jun 29, 2018

The Federal Open Market Committee (FOMC) is the group within the Federal Reserve that makes monetary policy decisions. The FOMC meets twice a year and each meeting lasts eight days. Are these two statements correct or incorrect? Why?

What will be an ideal response?

Question 2

Paul is looking for a used washing machine. He has posted his requirement in an exchange Web site and has also mentioned the maximum amount that he is willing to pay for it.

If his willingness to pay is lower than the price of good-quality used washing machines, what is likely to happen?

scikid · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The first statement is correct. The second statement is incorrect. It is indeed the case that the FOMC is the group within the Fed that makes monetary policy decisions. However the FOMC meets eight times a year, not twice. Of these eight meetings, six are for one day and two of the meetings last for two days.

Answer to Question 2

Paul's advertisement is likely to attract sellers of low-quality washing machines. This is because Paul's willingness to pay is well below the market price of high-quality used washing machines. Good-quality washing machines are valued at high prices and therefore owners of these machines will not be willing to sell at the price quoted by Paul. This is an example of adverse selection.