PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Question
Chapter 14, Problem 5P
(a)
To determine
Explain the effect of nominal interest rate, decrease in discount rate, and increase in discount lending.
(b)
To determine
Explain the effect of nominal interest rate and increase in reserve requirement for commercial banks.
(c)
To determine
Explain the effect of nominal interest rate and open market sales of government bonds to the public.
(d)
To determine
Explain the effect of nominal interest rate and decrease in reserve requirements for commercial banks.
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Students have asked these similar questions
The Federal Reserve manages the amount of money in circulation by buying or selling U.S. Treasury securities, usually Treasury bills. The increase or decrease of money in circulation helps the Fed to control inflation or deflation. This has an effect on your disposable income. Research the Federal Reserve system and money supply, then answer the following questions.
Under what conditions would the Fed choose to decrease the money supply, how would it do so, and what is the goal of doing so? How does the Fed factor inflation into its actions?
If an economy is operating at full employment and there is a substantial increase in the money supply, which of the following is most likely to happen?
A. Inflation increases
B. Interest rates increase
C. Real GDP increases
D. Unemployment increases
Which of the following lists two things that both increase the money supply?
a. The Fed buys bonds and raises the discount rate
b. The Fed buys bonds and lowers the discount rate
c. The Fed sells bonds and raises the discount rate
Chapter 14 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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Similar questions
- Draw a graph of the money market. Show the effect on the money demand curve, the money supply curve, and the equilibrium short-term nominal interest rate of each of the following: a. The Fed decreases the money supply. b. A recession causes real GDP to fall. c. The price level increases. d. The Fed increases the money supply at the same time that the price level falls.arrow_forwardThe Fed wants to decrease the money supply when the economy is booming and inflationary pressures ________ in the economy.arrow_forwardThe figure given below shows equilibrium in a money market. Which of the following will be observed if the money supply curve shifts from S to S' while the rate of interest remains at "“r"? Figure 15.2 interest rate S* S' r* B r r' m* m m' quantity of money a. There will be an excess demand for money. b. The Fed will buy U.S. Treasury securities. c. The quantity of money demanded will fall. d. The quantity of money supplied will fall. e. There will be an excess supply of money.arrow_forward
- Carefully explain how the Federal Reserve (Fed) will use each of the three monetary policy tools at its disposal to decrease the money supply.arrow_forwardA problem that the Fed faces when it attempts to control the money supply is that the Fed can only control excess reserves but not total reserves. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount. the Fed does not control the amount of money that households choose to hold as deposits in banks.arrow_forwardAccording to John Maynard Keynes, the demand for money in a country is determined entirely by that nation’s central bank. the supply of money in a country is determined by the overall wealth of the citizens of that country. the interest rate adjusts to balance the supply of, and demand for, money. the interest rate adjusts to balance the supply of, and demand for, goods and services.arrow_forward
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