**Question:**If the economy is currently experiencing 10% inflation, which Monetary Policy changes should the Federal Reserve implement (use)? Select all that apply.**Options:**- [ ] Increase the reserve requirement- [ ] Lower the reserve requirement- [ ] Increase the discount rate- [ ] Lower the discount rate- [ ] Sell bonds on the open market- [ ] Buy bonds on the open market**Explanation for Educational Context:**This question explores potential monetary policy actions the Federal Reserve might take during a period of high inflation. Students should understand that these actions aim to reduce inflation by tightening monetary policy. The correct choices involve measures like increasing the reserve requirement, increasing the discount rate, and selling bonds on the open market. These actions reduce the money supply, thereby exerting downward pressure on inflation rates.

Monetary policy results in changes in money supply, implemented by central bank.

If the economy is currently experiencing 10% inflation, which Monetary Policy changes should the Federal Reserve implement (used)? Select all that apply O increase the reserve requirement O lower the reserve requirement O increase the discount rate O lower the discount rate O sell bonds on the open market O buy bonds on the open market

If the economy is currently experiencing 10% inflation, which Monetary Policy changes should the Federal Reserve implement (used)? Select all that apply O increase the reserve requirement O lower the reserve requirement O increase the discount rate O lower the discount rate O sell bonds on the open market O buy bonds on the open market

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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D) what kind of monetary policy might be helpful to stabilize the economy ( expansionary or contractionary)? E) what specific monetary policy tools does the federal reserve have available to use in this scenario? F) explain in detal, how should the federal reserve use each ofthese tools to maximize their effect in stabilizing the economy, what will be the likely effect of each monetary tool's use on the money supply , and the resulting impact on the economy
5. The Federal Reserve's organization There are Federal Reserve regional banks. Which of the following is a responsibility of the Federal Open Market Committee (FOMC)? Making decisions regarding monetary policy Buying and selling stocks Issuing mortgages to homeowners The Federal Reserve's primary tool for changing the money supply is . In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will government bonds. O O
The money stock measured as M1 is growing at the rate of 5% per year. If real GDP is growing at 2% per year, and the income velocity of circulation of money is constant, Select one: the economy will achieve noninflationary growth O b. the inflation rate will be around 1%. O c. the inflation rate will be around 5% O d. the inflation rate will be around 3%.
Ceteris paribus, if the Fed was targeting the quantity of money supplied and money demand increased, the Fed would likely If the Fed was instead targeting interest rates and money demand increased, the Fed would likely O increase the money supply: decrease the money supply decrease the money supply: do nothing O increase the money supply: do nothing do nothing: increase the money supply do nothing: decrease the money supply
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If the Fed decided to decrease the Federal Funds Rate, (*the overnight rate that they lend to other banks) This means they are attempting to.. O Decrease the supply of money O Slow the economy because inflation is escalating O React to the trade war with China and restrict imports O Increase the supply of money
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If the target rate of interest is lower than the equilibrium interest rate, the Federal Reserve will Treasury bills in the open market, the supply of money, and the interest rate to the target rate. O sell; increase; lower sell; decrease; raise O buy; decrease; raise O buy: increase; lower
The economy is in a recession. The Fed could take direct action to stimulate economic activity by O lowering short-term interest rates O increasing long-term interest rates increasing short-term interest rates O lowering long-term interest rates
The accompanying table gives data for a commercial bank or thrift. If the legal reserve ratio falls from 25 percent to 10 percent , excess reserves single bank will _______by $ ______and the monetary multiplier will increase from to 10
Which of the following policies would the Federal Reserve most likely use if the economy was suffering from high inflation? O Decrease the required reserve rate O Buy bonds in the open market O Decrease the interest rate the Fed pays on bank reserves O Raise the discount rate
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