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Consider an expansionary open market operation. Suppose the Federal Reserve buys government securities from commercial banks. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. Then, ceteris paribus, bank reserves ,, currency in circulation_ , and thus the monetary base will Suppose now that the Federal Reserve wants to increase the monetary base by increasing bank reserves only. Which of the following actions enables the Fed to achieve its goal? Lend to commercial banks at the discount window Buy the government securities exclusively from commercial banks Require commercial banks to repay discount loans Buy the government securities exclusively from the non-banking public The Federal Reserve's control over the amount of government securities it buys or sells is lending. This is because the Fed has complete control over than its control over discount window

Consider an expansionary open market operation. Suppose the Federal Reserve buys government securities from commercial banks. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. Then, ceteris paribus, bank reserves ,, currency in circulation_ , and thus the monetary base will Suppose now that the Federal Reserve wants to increase the monetary base by increasing bank reserves only. Which of the following actions enables the Fed to achieve its goal? Lend to commercial banks at the discount window Buy the government securities exclusively from commercial banks Require commercial banks to repay discount loans Buy the government securities exclusively from the non-banking public The Federal Reserve's control over the amount of government securities it buys or sells is lending. This is because the Fed has complete control over than its control over discount window

Economics (MindTap Course List)
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter13: The Federal Reserve System
Section: Chapter Questions
Problem 11QP
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Consider an expansionary open market operation. Suppose the Federal Reserve buys government securities from commercial banks. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. Then, ceteris paribus, bank reserves ,, currency in circulation_ , and thus the monetary base will Suppose now that the Federal Reserve wants to increase the monetary base by increasing bank reserves only. Which of the following actions enables the Fed to achieve its goal? Lend to commercial banks at the discount window Buy the government securities exclusively from commercial banks Require commercial banks to repay discount loans Buy the government securities exclusively from the non-banking public The Federal Reserve's control over the amount of government securities it buys or sells is lending. This is because the Fed has complete control over than its control over discount window
Transcribed Image Text:Consider an expansionary open market operation. Suppose the Federal Reserve buys government securities from commercial banks. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. Then, ceteris paribus, bank reserves ,, currency in circulation_ , and thus the monetary base will Suppose now that the Federal Reserve wants to increase the monetary base by increasing bank reserves only. Which of the following actions enables the Fed to achieve its goal? Lend to commercial banks at the discount window Buy the government securities exclusively from commercial banks Require commercial banks to repay discount loans Buy the government securities exclusively from the non-banking public The Federal Reserve's control over the amount of government securities it buys or sells is lending. This is because the Fed has complete control over than its control over discount window
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