The Federal Reserve Board Web site contains valuable information and useful links to other Web sites. All of the following questions can be answered by going to the Federal Reserve Board's or to one of the sites linked to it. This is a long but interesting exercise. Get to work and you will learn a lot about the Fed!

1. As you know from this chapter, the Fed controls bank reserves, which are part of the monetary base. At the Federal Reserve Board Web site, go to its Statistical Releases and find release H.3. From that release, obtain the data needed to calculate the ratio of bank reserves to the monetary base for the most recent reporting period. Compute the ratio as a percentage and subtract it from 100 percent to find the portion of the monetary base that is held outside financial institutions. That is the end of your assignment, but here are some additional thought questions:
1.(a) Can you see now why it is hard for the Fed to control the money supply precisely?
2.(b) Where do you think the rest of the monetary base is, and under what conditions might it return to the banking system?

2. Find the most recent press release of the Federal Open Market Committee (FOMC) from the Web site (see the Internet Exercise in Chapter 2). What action did the FOMC take with respect to the target fed funds rate? What is the FOMC's current thinking about the state of the economy? Find an article from the Wall Street Journal, the New York Times, or your local newspaper that discusses the outcome of the recent FOMC meeting. How does the discussion in the article compare to the FOMC press release? Did the reporters get it right? Did the articles mention any impact of the announcement on the stock market or bond market? If so, what was the impact and how did the article explain it? Again, did the reporter get it right?

3. Find the Fed's Monetary Policy Report to Congress. Read Section 1, "Monetary Policy and the Economic Outlook." What was the Fed trying to do with monetary policy from 2009 to 2010? What was the economic basis for the Fed policy actions? What impact did the policy actions have on the fed funds rate, the 2-year Treasury rate, and the 10-year Treasury rate? Did the Fed change the discount rate during this period? What was the justification?