What would MOST LIKELY happen if the Federal Reserve decided to increase the reserve requirement in banks?
The amount of money circulating in the economy would decrease
. In the graph, the year with the highest unemployment rate is 1983.
What is the most likely outcome if the Federal Reserve decides it wants to expand the amount of money in circulation lower interest rates decreased economic growth higher unemployment lower inflation?
If the Federal Reserve decides to lower the reserve ratio through an expansionary monetary policy,
commercial banks are required to keep less cash on hand and are able to increase the number of loans to give consumers and businesses
. This increases the money supply, economic growth and the rate of inflation.
Which of the following actions would the Fed take that would result in increasing the money supply?
The correct answer is a.
When the Fed wants to increase the money supply,
it implements an expansionary monetary policy
. This type of policy includes the decrease of the discount rate, the purchase of government securities, and the reduction of the reserve requirement ratio.
When the Federal Reserve wants to increase the money supply it?
In open operations, the Fed buys and sells government securities in the open market. If the Fed wants to increase the money supply,
it buys government bonds
. This supplies the securities dealers who sell the bonds with cash, increasing the overall money supply.
What would the Federal Reserve do if it wanted to stimulate the US economy and reduce unemployment?
To deter inflation, … discourage business investment and consumer spending, which reduces real GDP, which slows economic growth and curbs inflation. If the Federal Reserve wanted to stimulate the economy to reduce unemployment,
it could
.
buy securities on the open market
.
What would be a reasonable monetary policy if the economy was in a recession?
The Federal Reserve might raise interest rates. The Federal Reserve might raise interest rates. What would be reasonable monetary policy if the economy was in a recession? … Fearing
a recession, the government decides to give citizens a tax rebate check to buy Christmas gifts.
Which action by the Federal Reserve would help to slow down rising inflation?
Tight monetary policy and raising the interest rates
is the action taken by the Federal Reserve to slow down the rising inflation.
What is the result of an increase in the money supply?
An increase in the supply of money typically
lowers interest rates
, which in turn, generates more investment and puts more money in the hands of consumers, thereby stimulating spending. Businesses respond by ordering more raw materials and increasing production.
What is one way the Federal Reserve System regulates the money supply?
The Fed controls the supply of money
by increas- ing or decreasing the monetary base
. The monetary base is related to the size of the Fed’s balance sheet; specifically, it is currency in circulation plus the deposit balances that depository institutions hold with the Federal Reserve.
What is a main goal of the Federal Reserve in its monetary policy?
The Federal Reserve Act mandates that the Federal Reserve conduct monetary policy “so as to promote effectively the goals of
maximum employment, stable prices, and moderate long-term interest rates
.”
1
Even though the act lists three distinct goals of monetary policy, the Fed’s mandate for monetary policy is commonly …
When the Federal Reserve wants to decrease the money supply it uses?
The purchase of securities increases the amount of reserves in the system, thereby increasing loan activity. 2. The Federal Reserve can decrease the money supply by
selling U.S. Treasury securities
.
What consumer behavior is the Federal Reserve Board trying to?
| Question Answer | What consumer behavior is the Federal reserve board trying to encourage when it implements a loose monetary policy? decreased saving and increased spending | which action by the Federal Reserve would help to slow down rising inflation? sell bonds |
|---|
How does the Federal Reserve make money?
The Fed creates
money through open market operations
, i.e. purchasing securities in the market using new money, or by creating bank reserves issued to commercial banks. Bank reserves are then multiplied through fractional reserve banking, where banks can lend a portion of the deposits they have on hand.
Which of the following is an indicator to the Federal Reserve that the economy is healthy?
Since
the real GDP
measures the entirety of the U.S. economy, it’s considered to be a key indicator of economic health. The real GDP is most often framed in terms of its percentage growth or decline.
Does Federal Reserve print money?
The U.S. Federal Reserve controls the money supply in the United States, and while
it doesn’t actually print currency bills itself
, it does determine how many bills are printed by the Treasury Department each year.
What did the Federal Reserve do in response to the Great recession?
As a third set of instruments, the Federal Reserve
expanded its traditional tool of open market operations to support the functioning of credit markets
, put downward pressure on longer-term interest rates, and help to make broader financial conditions more accommodative through the purchase of longer-term securities …
