When the Federal Reserve Banks decide to buy government bonds from banks and the public, the supply of reserves in the Federal funds market:
a. Increases and the Federal funds rate decreases
b. Decreases and the Federal funds rate decreases
c. Increases and the Federal funds rate increases
d. Decreases and the Federal funds rate increases
a. Increases and the Federal funds rate decreases
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
The Monetarist transmission mechanism through which monetary policy affects the price level, real GDP, and employment depends on the:
A. indirect impact of changes on the interest rate. B. indirect impact of changes on profit expectations. C. direct impact of changes in fiscal policy on aggregate demand. D. direct impact of changes in the money supply on aggregate demand.
Which of the following CANNOT be eliminated in a growing economy such as the U.S. economy?
A. relative poverty B. absolute poverty C. both absolute and relative poverty D. Neither absolute nor relative poverty can be eliminated.
State an equation for the two main uses of disposable income
What will be an ideal response?