Homework 12

The most important, most convenient, and most flexible way in which the Federal Reserve affects the supply of bank reserves is through:

conducting open-market operations

An open-market purchase of government securities by the Fed will:

increase bank reserves, and the money supply will increase

The most important tool of monetary policy is:

open-market operations

The money supply in Macroland is currently 2,500, bank reserves are 200, currency held by public is 500, and banks' desired reserve/deposit ratio is 0.10. Assuming the values of the currency held by the public and the desired reserve/deposit ratio do not change, if the Central Bank of Macroland wishes to increase the money supply to 3,000, then it should conduct an open-market ______ government bonds.

purchase of 50

The central bank of the United States is:

the Federal Reserve System

A rapidly growing supply of money will lead to:

inflation