Explain how the Fed would use its four tools to decrease and to increase the money supply
The Fed would raise reserve requirements to reduce the money supply and lower reserve requirements to increase the money supply. It would conduct open market sales to reduce the money supply and open market purchases to increase the money supply. The Fed would raise the discount rate to reduce the money supply and lower the discount rate to increase the money supply. Finally, it would increase the interest rate paid to banks on their excess reserves to reduce the money supply and decrease the interest rate paid to banks on their excess reserves to expand the money supply.
You might also like to view...
When price falls, demand rises.
Answer the following statement true (T) or false (F)
The act of putting a new product on the market in order to make profits is called
a. invention. b. innovation. c. investment. d. development.
Marginal physical product is
A. the increase in input usage resulting from an increase in revenue. B. the same as marginal revenue product. C. equal to average physical product when a monopoly firm is in equilibrium. D. the increase in output stemming from a one-unit increase in input.
A $2,000 decrease in investment will shift the aggregate expenditures curve down by:
A. exactly $2,000 and will decrease the equilibrium level of real GDP by exactly $2,000. B. exactly $2,000 and will decrease the equilibrium level of real GDP by less than $2,000. C. exactly $2,000 and will decrease the equilibrium level of real GDP by more than $2,000. D. less than $2,000 and will decrease the equilibrium level of real GDP by less than $2,000.