The FED uses open market operations to control the money supply in the economy. Open market operations is the purchase and sale of government securities. If the Federal Reserve wants to lower the monetary base and the money supply, it will sell government securities.
If the Fed wishes to reduce the monetary base by $40 million, then it may sell $40 million worth of US Treasuries. By doing this, the FED receives money and money is pulled out of circulation.
6. The FED would like to reduce the monetary base by $40 billion. What action should...
The FED would like to reduce the monetary base by $40 billion. What action should they take?
Name at least one action that the Fed could take to reduce the money supply and raise interest rates. Given our current economy, would you recommend that the Fed reduce the money supply and raise interest rates, or expand the money supply and lower interest rates? Please explain.
The Fed sells $4.9 billion in German government bonds, denominated in euros. What happens to the Fed's international reserves and the monetary base? Is this a sterilized or an unsterilized foreign exchange intervention? The Fed's international reserves (do not change / increase by $4.9 billion / decrease by $4.9 billion), and the monetary base (decreases by $4.9 billion / increases by $4.9 billion / does not change). This is (a sterilized / an unsterilized) intervention.
What would happen to the monetary base if the following occurred? Explain your reasoning. No points awarded without an adequate explanation. a. I withdraw $200 in currency from my checking account (3 points) b. the U.S. Treasury distributes to households $20 billion in social security payments, paying with deposits in its Fed account (3 points) c. The Federal Reserve decreases the required reserve ratio (4 points)
the economy is experiencing a recession and high unemployment a. Use an AD-AS model together with the Fed Funds market to represent ther short ran equilibrium in b. What types of monetary policy (i.e.. expansionary or restrictive) should the Fed implement? c. In implementing the policy you suggest. which actions (please give at least two actions) should the Fed take to achieve this policy? Explain how t he y policy would address this problem and the consequence of the monetar...
When the Fed changes monetary policy to reduce the rate of inflation, which of the following should occur in the medium run? (A) The AD curve should shift to the right. (B) The IA line should shift down. (C) The AD curve should shift to the left. (D) The IA line should shift up.
Suppose the Fed wanted to engage in an expansionary monetary policy. Which of the following should it do? a. Increase the reserve requirement ratio. b. Buy bonds on the open market. c. Sell bonds on the open market. d. Lower taxes. e. Increase the discount rate. The interest rate at which banks can borrow funds from the Fed is known as… a. the federal funds rate. b. the discount rate. c. the prime rate. d. the real interest rate. e....
What action should the Fed take if it wants to move from a point on the short-run Phillips curve representing low unemployment and high inflation to a point representing higher unemployment and lower inflation?
need all 5 answeres
If the monetary base is $1,000 billion, checkable deposits are $2,000 billion, the required reserve ratio is 10%, and excess reserves are $500 billion, then the currency in circulation are $500 billion, then 92,000 billion. A) $200 billion B) $300 billion. C) $450 billion. D) $700 billion. When the Federal Reserve wants to raise interest rates after banks have accumulated large amounts of excess reserves (i.e., when the supply curve intersects the demand curve at the...
The interest rate (0 Hd Monetary Base (H) There is negative relationship between the interest rate and the demand for the Fed money. And an increase in $Y shifts the demand for the Fed money curve to the right. Question 1: Suppose an economy without banks. In this economy the equilibrium in money market is given as follows: M = M = 0.25$Y - 0.20i, where $Y=$10 trillion and the interest rate is positive. a) If the Fed sets the...