When the Fed buys government bonds, the money supply increases and the federal funds rate increases. a. the money supply increases and the federal funds rate decreases. b. Oc. the С. money supply decreases and the federal funds rate increases. the money supply decreases and the federal funds rate decreases. d.
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- When the Fed buys government bonds, a- the money supply decreases and the federal funds rate increases. b- the money supply decreases and the federal funds rate decreases. c- the money supply increases and the federal funds rate decreases. d- the money supply increases and the federal funds rate increases.When the Fed lowers the federal funds rate target and buys bonds, what happens to short-term interest rates and the monetary base? A. short-term interest rates fall; the monetary base increases B. short-term interest rates fall; the monetary base decreases C. short-term interest rates rise; the monetary base increases D. short-term interest rates rise; the monetary base decreasesWhy does the Fed not target the quantity of money? The Fed does not target the quantity of money because _______. A. the Fed believes that it does not have enough control over the quantity of money because it is the banks that determine the quantity of loans and deposits B. the Fed believes that the quantity of money should remain constant C. Congress has passed laws that disallow this action by the Fed D. the Fed believes that if it changed the demand for money, the interest rate would fall and the growth of aggregate demand would slow down E. the Fed believes that the demand for money is too unstable
- If the Fed increases the monetary base, the a. federal funds rate rises. b. federal funds rate falls. c. quantity of money decreases. d. demand for money decreases.When the Fed increases the discount rate, banks will Oa, borrow more from the Fed and lend more to the public. The money supply la. increases Ob. borrow more from the Fed and lend less to the public. The money supply decreases Oc, borrow less from the Fed and lend more to the public. The money supply increases Od. borrow less from the Fed and lend less to the public. The money supply decreaseseconomic K The interest rate the Fed pays banks on their reserve holdings O A. has no impact on the federal funds rate. OB. guarantees a specific federal funds rate. C. sets a ceiling for the federal funds rate. OD. sets a floor for the federal funds rate.
- Money market equilibrium depends on what the central bank targets. How does the money market adjust to the equilibrium? If the central bank targets _______. A. the short-term interest rate, the quantity of money demanded adjusts B. the quantity of money demanded, the short-term interest rate adjusts C. the monetary base, the quantity of money supplied adjusts D. the quantity of money, the short-term interest rate adjustsWhen 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.15. When the Fed decreases the discount rate, banks will a. borrow more from the Fed and lend more to the public. The money supply increases. b. borrow more from the Fed and lend less to the public. The money supply decreases. c. borrow less from the Fed and lend more to the public. The money supply Increases. d. borrow less from the Fed and lend less to the public. The money supply decreases.
- Imagine 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.A 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 oneIf the Fed sells Treasury bills then O only the market rate of interest on Treasury bills will fall. O the price of Treasury bills will rise and the market rate of interest on Treasury bills will fall. O the price of Treasury bills will fall and the market rate of interest on Treasury bills will rise. Oonly the price of the Treasury bill will fall.