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- if the fed raise the reserve requirment on deposit from 15% to 20%, what would happen to the money supply? a. it would increase b. it would remain unchanged c, it depends on the value of interest rates d, it would decreaseIf the Fed decreases the federal funds rate and/or the discount rate, the money supply does what? A. It increases. B. It decreases. C. It remains unchanged as the federal funds rate has no impact on the money supply.Explain whether each of the following eventsincreases or decreases the money supply.a. The Fed buys bonds in open-market operations.b. The Fed reduces the reserve requirement.c. The Fed increases the interest rate it pays onreserves.d. Citibank repays a loan it had previously takenfrom the Fed.e. After a rash of pickpocketing, people decide tohold less currency.f. Fearful of bank runs, bankers decide to hold moreexcess reserves.g. The FOMC increases its target for the federalfunds rate.
- Based on the graphs below, and the Fed institutes the appropriate monetary, how will this appear on the money market graph (first graph) M 10 X Price Level 0000 Quental fasamen Guantidred Lea Money demand shifts to the right. Money demand shifts to the left. Money supply shift to the right Money supply shift to the lett. LEAS Ped SHAS 20When the Fed increases the money supply, we expect a. interest rates and stock prices to rise. b. interest rates to fall and stock prices to rise. c. interest rates to rise and stock prices to fall. d. interest rates and stock prices to fall.Use the following diagram to answer Question #22. Figure 3, Money Supply and Money Demand Money Suppy MB Money Suppiy MS We of money, 1P 1P1 MD Quantity of Money, M (Dilions of dollars) SB00 5800 In the conduct of U.S. monetary policy, ceteris paribus, which of the following activities by the Fed would be most consistent with the shift in the diagram above? Select one: a. an open market purchase b. a decrease in the required reserve ratio C. an increase in the interest rate the Fed pays on bank reserves held at the Fed d. Quantitative Easing
- Which of the following actions by the Fed wouldtend to increase the money supply?a. an open-market sale of government bondsb. a decrease in reserve requirementsc. an increase in the interest rate paid on reservesd. an increase in the discount rate on Fed lendingA purchase of U.S. government securities by the Fed causes A. a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased. B. a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system. C. an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system. D. a multiple expansion of the money supply because the required reserve ratio is less than oneImagine that the federal funds rate was above the level the Federal Reserve had targeted. To move the rate back towards itť's target the Federal Reserve could O sell bonds. This selling would reduce the money supply. O buy bonds. This buying would increase the money supply. O sell bonds. This selling would increase the money supply O buy bonds. This buying would reduce the money supply.
- What is the expected impact of a decline in the money supply to the US economy? A. Higher aggregate prices (inflation) B. Lower aggregate prices (deflation) C. There is no general relationship between the money supply and inflaton12 MD 240 Quant ity of money 160 200 100 120 140 Ouantity of investment Refer to figure above to answer this question. If the money supply is equal to 180, what are the values of the interest rate and investment spending? 12 percent and 110. 12 percent and 120. 4 percent and 150. 8 percent and 130. 10 percent and 120. Rate ol interesta. (i).Draw a graph showing equilibrium in the money market. Carefully label all curves andaxes and explainwhy the curves have the slopesthey do.(ii). Using the graph you prepared in a(i), illustrateand explain what happens when the Central Bankdecreases the money supply.(iii).When the Central Bankdecreases the money supply, theequilibrium level ofincome changes. Illustrate andexplain how
