How do targeted asset purchases alter the outlook for the economy and inflation?
What will be an ideal response?
By selling short term securities like U.S. Treasury bills and buying mortgage backed securities the Fed alters its mix of default-free and credit-risk assets. This can influence both the cost and availability of credit. By its acquisition of MBS the Fed increases the overall demand for the asset, boosts its price and lowers its yield.
You might also like to view...
As part of the "exchange rate effect of monetary policy," a higher money supply causes __________ of the domestic currency and thus __________ net exports
A) appreciation; rising B) appreciation; falling C) depreciation; rising D) depreciation; falling
Which of the following statements is true of a monopolist?
a. The firm charges the highest possible price. b. The firm always earns a profit. c. The firm might earn a profit in the long run. d. The firm generates a larger consumer surplus than a perfectly competitive firm. e. The firm is more production efficient than a perfectly competitive firm.
A decrease in the price of product X will: a. increase the marginal utility per dollar spent on X
b. decrease the marginal utility per dollar spent on X. c. result in an increase in the total utility from consumption of X. d. do both (a) and (c).
The majority of people with private health insurance get it
A. in groups. B. individually. C. along with one other person. D. at the grocery store.