6 2. Refer to the given figure. Nominal Interest Rate (1) 9% 7% 5% 3% 1% 1 1 1 Money Supply MS 100 300 500 700 900 Money Demand MD Money Explain how federal reserve change the money supply to lower the interest rate to 3 percent

3. Money held by the public that includes demand deposits is measured as (A) M1 (B) M2 (C) MO (D) Fiat money (E) Commodity money

Figure 34-3. Interest Rate 1 T₁ Price Level 3 P₂ P₁ Quantity of Money t Quantity of Y₂ Y₁ Output 4 Refer to Figure 34-3. What quantity is represented by the vertical line on the left- hand graph? the rate of inflation the demand for money the quantity of bonds that was most recently sold or purchased by the Federal Reserve the supply of money

23. Identify the four major methods the Fed uses to control the money supply. Give two examples of situations in which the Fed might use one of these methods and explain why that method is best for the given situation.

No written by hand solution

7. The four major instruments (or tools) of monetary policy are: 1) Open market operations 2) The Discount Rate 3) The reserve ratio 4) Interest on Reserves The Fed uses four major tools to control the reserves of banks and the size of the money supply. 1) The Federal Reserve can buy or sell government securities in the open market to change the lending ability of the banking system: (a) buying government securities in the open market from either banks or the public ( increases, decreases ) the excess reserves of banks; (b) selling government securities in the open market to either banks or the public ( increases, decreases ) the excess reserves of banks. 2) The Fed can raise or lower the reserve ratio: (a) raising the reserve ratio ( increases, decreases ) the excess reserves of banks and the size of the monetary (checkable-deposit) multiplier; (b) lowering the reserve ratio (increases, decreases) the excess reserves of banks and the size of the monetary multiplier. 3) The Fed can…

1. If the demand for money curve shifts from Md1 to Md0 the equilibrium interest rate will.. Increase from 5% to 10% Decrease from 7% to 5% Increase from 5% to 7% Remain at 7% 2. If the demand for money curve shifts from Md1 to Md0 and the interest rate remains at 5% there will be An equilibrium in the money market An excess demand for money An equilibrium in the bond market An excess supply of money

-The Golden State Bank has total cash reserves of $110,000, deposits of $200,000, and loans of $90,000.  The reserve requirement is 5 percent.  This bank can make additional loans up to the amount of: $10,000 $5,500 $100,000 $190,000

39. Which of the following are ways in which banks can help businesses in the United States? Choose all that apply. Banks can reduce the money supply through the use of the money multiplier. Banks can serve as a stopgap to save struggling businesses from bankruptcy with small loans. Bank loans remove personal liability from company owners. O Bank loans are tax-deductible for businesses.

During the Covid crisis, the Fed issued a large quantity of money supply and interest rate has great pressure to fall below zero. What did Fed do to maintain the interest rate above zero and how does this approach work? (refer to image)