Explain why the Fed making more discount loans to banks, or an open market purchase, or an increase in foreign exchange reserves all have the same effect on its balance sheet. What is that effect on the monetary base?
What will be an ideal response?
If the Fed increases its discount loans to banks, makes an open market purchase of Treasury securities, or increases its foreign exchange reserves, the impact on its balance sheet will be the same. In each case the Fed's assets and liabilities will both increase; the level of reserves increases and the monetary base expands. All three of these actions have the same effect because they all result in an increase in the reserves available to the banking system, which therefore means an increase in the base.
You might also like to view...
If there is increasing opportunity cost, then when moving downward on a production possibilities frontier, the opportunity cost of the good on the horizontal axis ________ as more of the good is produced
A) increases and the PPF gets steeper B) increases and the PPF gets flatter C) decreases and the PPF gets steeper D) decreases and the PPF gets flatter E) does not change and the PPF gets steeper
Evidence suggests that emergency care services are normal goods
a. True b. False Indicate whether the statement is true or false
The most important job of the Federal Reserve is to ______.
Fill in the blank(s) with the appropriate word(s).
Limited personal liability is an advantage for
A) sole proprietorships and partnerships. B) partnerships and corporations. C) sole proprietorships and corporations D) corporations.