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The Fed conducts open-market sales, which of the following three increases: interest rates,
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- When the Fed targets the amount of money in the economy, interest rates become more variable. True FalseAn increase in the interest rate will cause an increase in the demand for money. True FalseAssume that the Fed follows an unhinged intervention by selling $500 billion worth of GBP against USD in the foreign exchange market. By using the supply and demand diagram of USD show the results of this policy on the price of USD expressed in GPB (GBP/USD).
- If the money supply increases, and the price level is unchanged, interest rates will fall. True or falseExplain the links between changes in the nation’s money supply, the interest rate, investment spending, aggregate demand, and real GDP (and the price level).Relevant knowledge is important because monetary policy affects all aspects of the economy as well as the functioning of the product and financial markets. Explain what happens to aggregate demand, real GDP, and the price level.
- As a "lender of last resort" the Fed :protects the deposits of $100,000 or less in all commercial banks in the country .bails out any depository institution it has decided should not be allowed to fail .bails out any corporation the government has decided should not fail .is obligated to bail out any depository institution in the country that is in financial difficultyMonetary policy actions by the Fed areCurrent U.S. monetary policy is best described as: Aimed at keeping inflation low and stable and growth high and stable Determining the denominations of a country's currency One of the most important functions of Congress Attempting to keep inflation constant at zero percent
- Federal Reserve & Open Market Operations If the Fed shifts to a more restrictive monetary policy, and it utilizes the open market operations tool, describe what will happen to each of the following: net exports the prices of stocks real GDPWhen the Federal Reserve buys bonds, it effectively lowers the nominal interest rate in the market. true falseIf the Fed was concerned about the economy falling into recession, it might accommodate this development by stimulating the economy through: raising the interest rate paid on reserves. purchasing additional government securities. conduct open market sales. raise the interest rates that consumers and businesses pay when taking out loans.