Question 7 Suppose that currently we are in the era of ample reserves. The total amount of reserves in the banking system is $4 trillion. Which of the following monetary policy actions by the Fed will most likely cause the equilibrium federal funds rate to decrease? O a. An open market purchase of $20 billion. O b. A reduction in the discount rate. O c. A reduction in the required reserve ratio. d. A reduction in the interest rate on reserves. Oe. None of the above.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

E2

Question 7
Suppose that currently we are in the era of ample reserves. The total amount of reserves in the
banking system is $4 trillion. Which of the following monetary policy actions by the Fed will most
likely cause the equilibrium federal funds rate to decrease?
O a. An open market purchase of $20 billion.
O b. A reduction in the discount rate.
O c. A reduction in the required reserve ratio.
O d. A reduction in the interest rate on reserves.
Oe. None of the above.
Question 8
Which of the following events will cause an increase in the supply of federal funds (supply function
will shift to the right)?
O a. Banks decide to lend out more money to people.
b. Banks decide to lend out more money to other banks.
O c. People deposit their paychecks in their deposit accounts at commercial banks.
O d. Banks buy bonds from the public.
O e. The Fed buys bonds from commercial banks.
Transcribed Image Text:Question 7 Suppose that currently we are in the era of ample reserves. The total amount of reserves in the banking system is $4 trillion. Which of the following monetary policy actions by the Fed will most likely cause the equilibrium federal funds rate to decrease? O a. An open market purchase of $20 billion. O b. A reduction in the discount rate. O c. A reduction in the required reserve ratio. O d. A reduction in the interest rate on reserves. Oe. None of the above. Question 8 Which of the following events will cause an increase in the supply of federal funds (supply function will shift to the right)? O a. Banks decide to lend out more money to people. b. Banks decide to lend out more money to other banks. O c. People deposit their paychecks in their deposit accounts at commercial banks. O d. Banks buy bonds from the public. O e. The Fed buys bonds from commercial banks.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Comparative Advantage
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education