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When the Federal Reserve increases the money supply, people spend more because they now have more money. O True O False
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- The table below describes two different demands for money and the supply of money. Answer the following questions based on this table. Instructions: Enter your answers as a whole number. Total Demand for Money Price of Money Money Supply Demand 1 Demand 2 Total Money Demand 1 $400 $300 $150 $ 2 400 250 150 3 400 200 150 400 150 150 5 400 100 150 a. What is the price of money? O Consumer Price Index O Interest rate O Inflation rate O Production rate b. What type of demand for money does Demand 1 represent? O Unit-of-account demand O Asset demand O Total demand O Transaction demand c. What type of demand for money does Demand 2 represent? O Total demand O Unit-of-account demand O Transaction demand O Asset demand d. Complete the "Total Money Demand" column in the above table.Economics To increase the money supply, what could the Federal Reserve do? Choose one or more: OA. make an open market sale OB. decrease the discount rate O Cincrease income taxes OD. increase the discount rate O E. make an open market purchaseIn 2019, The Fed was liquidating their balance sheet (meaning they were selling off the bonds and securities purchased in The Great Recession 2007-2009). That means they are trying to do what in regards to the supply of money. O Increase O Decrease O Create a money stream to increase supply of money O Increase their Capital Gains
- Is it possible that money supply can be more than the money demand (this means that we can have too much money)?The Fed sells treasuries when it wants to reduce the money supply. O True FalseIf the FOMC orders the open market desk to sell government securities, A. the money supply will increase, and the interest rate will increase. B. the money supply will increase, and the interest rate will decrease. C. the money supply will decrease, and the interest rate will increase. D. the money supply will decrease, and the the interest rate will decrease. O O O
- The Central Bank prints withdraws money from circulation and burns it. This will cause interest rates to: (Hint: draw a graph for the money market to figure out your answer.) O Stay the same Decrease IncreaseHow does an increase in economic activity affect the money demand curve?A decrease in the money supply causes the interest rate to rise so that investment falls. a. TRUE b. FALSE
- In which situation does the value of money increase? if either money demand or money supply shifts right if either money demand or money supply shifts left if money demand shifts right or money supply shifts left if money demand shifts left or money supply shifts rightWhich of the following reduces the interest rate? a. a decrease in government expenditures and a decrease in the money supply b. an increase in government expenditures and an increase in the money supply c. an increase in government expenditures and a decrease in the money supply d. a decrease in government expenditures and an increase in the money supplyIn the graph below (the market for money), the Rate of interest price of a dollar 12 10 8 4 2 50 ✔interest rate ✔price of borrowing or lending money O purchasing power S 100 250 Quantity of money demanded & supplied (billions of dollars) 150 is determined by the total demand for money intersecting with the total supply of money. 200 D