How can the Fed make bonds more attractive as an alternative to holding money, and what is the impact to the money supply?
What will be an ideal response?
There is an inverse relationship between the price paid for an existing bond and the bond's yield. The Fed can induce people to buy bonds by selling them at a reduced price because this causes the bonds' yield to increase. The Fed accomplishes this through an open market sale, which reduces the growth rate of the money supply.
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Several political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they raise. The economic way of thinking indicates that legislation of this type would: a. make it more expensive for parents to provide for their children
b. reduce the value of children to their parents and therefore lead to a reduction in the birth rate. c. reduce the after-tax cost of raising children and therefore increase the birth rate. d. exert no impact on either the cost of raising children or the birth rate since parenting children is a non-economic activity.
In terms of an economy's production possibilities curve, a decrease in the level of human capital, ceteris paribus, will cause
A. An inward shift of the curve. B. A movement along the curve. C. A movement from the curve to a point inside the curve. D. An expansion of the curve.
Amazon's Home Services website connects customers of appliances with professionals who can install appliances for those customers. As a result of this service, Amazon is a
A. loss leader. B. supermarket. C. platform firm. D. voluntary firm.
In the Keynesian model in the short run, a decrease in government purchases causes output to ________ and the real interest rate to ________
A) fall; rise B) fall; fall C) rise; rise D) rise; fall