There are several ways that governments can increase or decrease the money supply. Match the descriptions with thecorresponding policy tool. It's possible that a description does not apply to any of the policy tools.Open market operationsReserve requirementDiscount rateQuantitative easingAnswer Banka central bank purchasing existing bond:sa government printing more currencya central bank purchasing a large quantity of longer-term Treasury bondsan increase in the percentage of deposits that banks must keep on handan increase in the interest rate that a central bank charges commercial banks for loansan increase in government spending

Money supply is the stock of money in circulation in an economy in a given time period.Open market…

Answered: There are several ways that governments…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hi, can I get help with this question I'm not sure what to choose? I'm confused base on the graph and I'm not quite sure what statement is accurate. The graph is in the attachments with download data. Here's the question: Why is it important for the central bank to be independent from the part of the government responsible for spending? A. The Federal Reserve is, historically, driven by political ideologies. Allowing it to influence the rest of government could harm its ability to enact effective monetary policy. B. If not independent, the government might be tempted to have the central bank print more money (creating inflation) whenever the government runs a budget deficit. C. If not independent, the government might be tempted to have the central bank print more money (creating deflation) whenever the government runs a budget surplus.
During the great depression, the US economy in 1932 experienced an inflation rate of -10.3%. The GDP decreased from 905 billion to 788 billion, a decrease of 12.9%. Which of the following Monetary Policy changes would be appropriate? Increase the Money Supply and lower interest rates. Decrease the Money Supply and increase interest rates. Increase the Money Supply and increase interest rates. Decrease the Money Supply and lower interest rates.
According to Monetarists, what should the government do if unemployment is 4% and inflation is 12%? Select one: a. Decrease the supply of money b. Decrease government spending c. Raise taxes d. Do nothing e. Lower interest rates
Suppose that the Bank of Canada determines that the Canadian economy is currently overproducing. What can the Central Bank do to slow down economic activity? a. The Central bank can pursue an expansionary monetary policy by increasing the money supply, causing a decrease in the interest rate. As a result, real GDP will increase and the price level will increase. b. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing a decrease in the interest rate. As a result, real GDP will decrease and the price level will decrease c. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will decrease. d. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will increase e. The…
What is a monetary rule? What is its purpose? Illustrate and explain the implementation of a monetary rule.
Which of the following is NOT a function of the Fed? OPTIONS: Regulating the money supply Holding reserves for depository institutions Lending funds to credit-worthy private firms Supervising member banks
Please explain thoroughly the limitations of using the monetary policy tools.
Explain the type of policies a central bank can implement to raise the interest rate
Suppose all banks have zero excess reserves. The Fed buys bonds for $1 million and a bond dealer deposits the check in his or her bank. The required reserve ratio is 8 percent. The bank loans out the maximum it is allowed to a local business. The business writes a check for the full amount for supplies, which is then deposited in another bank. The largest loan the second bank can make is: The largest loan the second bank can make is $. (Round your answer to the nearest dollar.)
In this Decision Point activity you learned about how changes to monetary policy by the Federal Reserve should impact your own decisions and the decisions of everyone across the economy. Apply what you learned in this decision point to the following questions. One of the tools the Fed uses to influence interest rates is to pay banks interest on excess reserves they hold overnight with the Fed. You're a director at a bank. Your bank currently holds $185 million in excess reserves at the regional Fed and you're earning an annual rate of 2.42% on those excess reserves sitting at the Fed. The Fed decides to decrease the interest rate it pays on excess reserves from an annual rate of 2.42% to 1.55%. In response, you should the amount of excess reserves held at the Fed and make any given interest rate. loans at
What are the goals of monetary policy? maximum employment and stable prices zero unemployment and zero inflation zero unemployment and stable prices maximum employment and zero inflation The Federal Reserve seeks to achieve these goals by choosing between maximum employment and stable prices in the long run. maintaining both the money supply and short-term interest rates at low levels. keeping the growth rate of money consistent with the growth rate of the natural rate of output. targeting short-term interest rates and the money supply.
The former chairman of the Federal Reserve, Alan Greenspan, used the term "irrational exuberance" in 1996 to describe the high levels of optimism among stock market investors at the time. Stock market indexes such as the S&P Composite Price Index were at an all-time high. Some commentators believed that the Fed should intervene to slow the expansion of the economy. Why would central banks want to clamp down when the economy is growing?

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