Question

 3. How the Fed influences the money supply

 Which of the following are ways that the Federal Reserve influences the U.S. economy through its monetary policies? Check all that apply.

 O Using open-market operations to sell securities, the Fed can increase the money supply, thereby increasing interest rates and

 subsequently reducing the rate of inflation.

 O Using open-market operations to buy securities, the Fed can increase the money supply, thereby increasing interest rates, which would cause security prices to decrease.

 Using open-market operations to sell securities, the Fed can decrease the money supply, thereby increasing interest rates, which would

 cause security prices to decrease.

 O The Fed can increase the Fed funds rate in an attempt to balance out inflationary pressure.

 The following graphs represent (1) The Money Market and (2) The Aggregate Supply and Aggregate Demand within the U.S. economy.

 The money market shows how the nominal interest rate fluctuates to make the amount of money that people want to hold equal to the money supply.

 The demand curve shows the relationship between the quantity of money demanded and interest rates, and it's downward sloping because this is an inverse relationship. As interest rates increase, people would prefer to invest their financial assets, decreasing the quantity of money demanded. As interest rates decrease, people may be more willing to hold their Financial assets as cash or bank deposits and borrow, increasing the quantity of money demanded. The money supply shows the relationship between the amount of money supplied and interest rates, and is vertical because money creation changes interest rates, however it is not being done in response to interest rates. And so, the money supply is independent of interest rates, which gives it the vertical shape.

 The aggregate supply and aggregate demand model shows the relationship between changes in real gross domestic product and changes in the price level (inflation). The aggregate demand curve shows the relationship between the price level and the total amount of money spent on those goods and services. It is downward sloping because this is an inverse relationship. As the price level increases, the amount of goods and services demanded will decrease. As the price level decreases, the amount of goods and services demanded will increase. The components that make up real GDP are:

 Consumer Spending (C), Business Investment (I), Government Expenditures (G), and Net Exports (X-M). The aggregate supply curve shows the relationship between the price level and the total amount of output Tirms will sell. It is upward sloping because this is a positive relationship. As the price level increases, the amount of goods and services sold will increase. As the price level decreases, the amount of goods and services sold will decrease.

 Use the graph to show what happens in the given scenario and to help answer the questions that follow. (Note: You will not be graded on any changes you make to the graph.)

 Suppose the FOMC's policy directive instructs the Trading Desk at the New York Ted to decrease the federal funds rate because the U.S. economy is experiencing a recession, and the FOMC wants to stimulate spending in the economy.

 If the FOMC wants to decrease the Ped funds rate, then the Trading Desk traders will _______  government securities. This results in a shift of

 the money supply curve to the and so there will be a(n)_______  in interest rates. As a result, consumers will purchase _______  and 

 save_______  and businesses will invest _______ . Consequently, the aggregate demand curve will shift to the right, which shows that the

 economy has been successfully stimulated.

Answer 1

Part 1 :

Answer will be both Option C and Option D

Explanation -

Option A is false because if securities were sold by fed then there will be decrease in money supply in economy and not increase

Option B is false because if money supply increases then the interest rates will fall but it was mentioned as increase in interest rate in the option

The remaining two options are correct

Part 2 :

Answers for the blanks are

1. Buy/Purchase

2. Right/Rightward

3. Decrease

4. More

5. Less

6. More/High