To increase the (growth of the) money supply, the Fed could
either buy bonds, lower the reserve requirement ratio, or lower the discount rate
. To decrease the (growth of the) money supply, the Fed could either sell bonds, raise the reserve requirement ratio, or raise the discount rate.
Which of the following actions would the Fed undertake if it wants to stimulate an economy?
Which of the following actions would the Fed undertake if it wants to follow a more restrictive monetary policy?
sell some of its holdings of government bonds
. increase and the money supply will eventually increase.
Which of the following would be most appropriate if the Federal Reserve wanted to increase the money supply in order to stimulate the economy quizlet?
buy U.S. securities on the open market. Which of the following would be most appropriate if the Federal Reserve wanted to increase the money supply in order to stimulate the economy?
buy government bonds
, which will increase the money supply; this will cause interest rates to fall and aggregate demand to rise.
When the Federal Reserve System wants to increase the money supply what does it typically do?
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.
When the Fed unexpectedly increases the money supply it will cause?
If the Federal Reserve unexpectedly increases the money supply, which of the following will most likely happen in the short run?
real GDP will rise
.
Which of the following actions will cause the supply of money to increase?
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.
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 are the two main ways economists speed up or slow down the economy?
Jacob: So now we’ve talked about the two main ways economists speed up or slow down the economy.
Fiscal policy, which is changing government spending or taxes
, and now monetary policy, which is changing the money supply. In an ideal world, the economy would always be perfect, and we wouldn’t need these tools.
What action would the Federal Reserve take to control inflation?
The Federal Reserve seeks to control inflation
by influencing interest rates
. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
Which of the following is a monetary policy that can be used to counteract a recession?
Which of the following is a monetary policy action used to combat a recession?
decreasing taxes
.
What would be 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.
How can the Federal Reserve actually increase the money supply quizlet?
To increase money supply,
Fed can lower discount rate
, which encourages banks to borrow more reserves from Fed. Banks can then make more loans, which increases the money supply. To decrease money supply, Fed can raise discount rate. To increase money supply, Fed buys govt bonds, paying with new dollars.
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.
Which of the following is the most frequently used tool the Fed uses to control the supply of money quizlet?
The Federal Reserve Board has 3 tools to influence the money supply: the discount rate, the reserve requirement, and open market operations.
The purchase and sale of government securities by the Federal Open Market Committee (FOMC)
is the most frequently used tool of the Fed.
What is the effect of an increase in the money supply in the short run?
In the short-run, an increase in the money supply
decreases the nominal interest rate
, which increases investment and real output.
What open market operation did they conduct and what problem would they be trying to correct?
What open market operation did they conduct, and what problem would they be trying to correct?
Buy bonds to fix a recession
. Economic conditions in Fredland have caused the demand for money to increase which has changed the nominal interest rate.
