fourth ten
Lowering the reserve ratio
changes required reserves to excess reserves
If the FED buys government securities from commercial banks in the open market
commercial banks give the securities to the FED, and the FED pays for them by increasing the reserves of commercial banks at the FED
Lowering the discount rate has the effect of
making it less expensive for commercial banks to borrow from the central banks
The economy is experiencing inflation and the Federal Reserve decides to pursue a restrictive money policy. Which actions by the FED would be most consistent with this policy
selling government securities
Inflationary pressure is a growing problem for the economy. Therefore, the Federal Reserve decides to pursue a policy to reduce the inflationary pressure. Which policy changes by the FED would reinforce each other to achieve that objective
selling government securities and raising the discount rate
Changes in interest rates cause a shift in
the aggregate demand curve, but not the investment demand curve
Assuming that the Federal Reserve Banks sell $40 million in government securities to commercial banks and the reserve ratio is 20 percent, then the effect will be to reduce
the potential money supply by $200 million
What is one of the advantages of monetary policy over fiscal policy
the quickness with which it can be used
Which of the following best describes what occurs when monetary authorities sell government securities
there is a decrease in the size of commercial banks excess reserves, the money supply decreases, and the interest rates rise, thereby causing a decrease in investment spending and real GDP