Identify and explain the three ways that the Federal Reserve controls the money supply. What is...
Identify and explain the three ways that the Federal Reserve
controls the money supply. What is the impact on business when the
money supply is increased? What is the impact on business when the
money supply is decreased?
Homework Answers
The Federal bank controls the money supply by increasing or decreasing the discount rate , buying and selling the bonds in the market, and manipulating the reserve requirement.
When they have to increase the money supply they decrease the reserve requirement and discount rate, they do open market purchasing.
When they have to decrease the money supply they increase the reserve requirement and the discount rate and they sell the bonds in the market.
WHen the money supply is increased the interest rate falls and business borrow more loan and invest when the money supply is decreased the interest rate rises and that reduce the investing.
Add Answer to:
Identify and explain the three ways that the Federal Reserve
controls the money supply. What is...
If the Federal Reserve increases the reserve requirement, what will happen to the Money Supply in...
If the Federal Reserve increases the reserve requirement, what will happen to the Money Supply in the banking system? a. Increase b. Decrease c. Remain the same
Explain what we would expect to happen to the money supply if the Federal Reserve buys...
Explain what we would expect to happen to the money supply if the Federal Reserve buys $120 billion worth of U. S. Government bonds while banks increase their discount loans by $40 billion. Be as specific as possible in your answer given the information provided.
3. Assume that the money market is initially in equilibrium and that the money supply is then increased. Explain th...
3. Assume that the money market is initially in equilibrium and that the money supply is then increased. Explain the adjustments toward a new equilibrium interest rate. Will bond prices be higher at the new equilibrium rate of interest? What effects would you expect that interest-rate change to have on the levels of output, employment, and prices? Answer the same questions for a decrease in the money supply 4. How is the chairperson of the Federal Reserve Board selected? Describe...
If the Federal Reserve Bank purchases a large stock of bonds, what happens to money supply?...
If the Federal Reserve Bank purchases a large stock of bonds, what happens to money supply? Explain. Use the money market diagram (money demand-money supply diagram) to illustrate the effects of such an intervention on the equilibrium interest rate. Why does the interest rate change (increase or decrease) following the bond purchase by the Fed?
If the Federal Reserve increases the US money supply, what will this do to the value...
If the Federal Reserve increases the US money supply, what will this do to the value of the US dollar compared to the euro?
Describe how expansionary activities conducted by the Federal Reserve impact credit availability, the money supply, interest...
Describe how expansionary activities conducted by the Federal Reserve impact credit availability, the money supply, interest rates, and security prices. Suppose the Federal Reserve purchases $10 billion worth of foreign currency in exchange for deposit accounts at the Federal Reserve. Show the changes that result from this transaction on the Fed’s balance sheet.
The Federal Reserve can increase the money supply by buying government securities from the non-bank public...
The Federal Reserve can increase the money supply by buying government securities from the non-bank public in the secondary market. Use supply and demand analysis for government securities to discuss the impact of the above action on the interest rate.
If the Federal reserve increases the supply of money: A. there will be an increase in...
If the Federal reserve increases the supply of money: A. there will be an increase in government spending. B. there will be a decrease in aggregate demand. C. there will be no effect on aggregate demand. D. there will be a decrease in interest rates. E. there will be an increase in interest rates.
To _____ the money supply, the Federal Reserve could _____. A. decrease; lower the discount rate...
To _____ the money supply, the Federal Reserve could _____. A. decrease; lower the discount rate B. increase; raise the federal funds rate C. increase; lower the reserve requirements D. decrease; conduct open-market purchases
D Question 11 2 pts A fractional-reserve banking system doesn't impact borrower wealth or money supply...
D Question 11 2 pts A fractional-reserve banking system doesn't impact borrower wealth or money supply increases borrower wealth, but no impact on money supply increases both money supply and borrower wealth increases money supply, but has no effect on wealth D Question 12 2 pts Which of the following would not change structural unemployment? increased union power higher minimum-wage laws decreased union power increased unemployment insurance benefits lower minimum-wage laws We were unable to transcribe this image
Explain what we would expect to happen to the money supply if the Federal Reserve buys $120 billion worth of U. S. Government bonds while banks increase their discount loans by $40 billion. Be as specific as possible in your answer given the information provided.
3. Assume that the money market is initially in equilibrium and that the money supply is then increased. Explain the adjustments toward a new equilibrium interest rate. Will bond prices be higher at the new equilibrium rate of interest? What effects would you expect that interest-rate change to have on the levels of output, employment, and prices? Answer the same questions for a decrease in the money supply 4. How is the chairperson of the Federal Reserve Board selected? Describe...
D Question 11 2 pts A fractional-reserve banking system doesn't impact borrower wealth or money supply increases borrower wealth, but no impact on money supply increases both money supply and borrower wealth increases money supply, but has no effect on wealth D Question 12 2 pts Which of the following would not change structural unemployment? increased union power higher minimum-wage laws decreased union power increased unemployment insurance benefits lower minimum-wage laws We were unable to transcribe this image
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