Question

If the Federal Reserve decided to raise interest rates, it could sell bonds to lower the...

If the Federal Reserve decided to raise interest rates, it could

sell bonds to lower the money supply.

buy bonds to raise the money supply.

buy bonds to lower the money supply.

sell bonds to raise the money supply

According to the equation of exchange, if real GDP and money supply stays the same,

inflation is always zero.

money velocity must stay the same.

the rate of inflation equals the rate of change in money velocity.

None of the above.
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans) buy bonds to raise the money supply is the correct option. There is a negative relationship between money supply and interest rate. Larger money supply will lower interest rate. the Fed can reduce the interest rate that it charges to give banks more reserve , thereby tempting banks to borrow more

Ans) the rate of inflation equals the rate of change in money velocity is the correct option. equation of exchange is MV = PY where M is money supply, P is price level, V is velocity ans T is transaction

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider two countries: Eastland and Westland. Eastland’s long-run Phillips curve sits further to the right than does Westland’s long-run Phillips curve.
QUESTION 1Consider two countries: Eastland and Westland. Eastland’s long-run Phillips curve sits further to the right than does Westland’s long-run Phillips curve. Eastland and Westland are identical in all other ways. In particular, they have the same money supply growth rates. In the long run, compared to Westland, which of the following will we observe in Eastland?   a.lower unemployment and higher inflation.b.higher unemployment and higher inflation.c.None of the other options is correct.(Wrong)d.higher unemployment and the same rate of inflation.QUESTION 2According...
To reduce the Federal Funds rate the Federal Reserve would need to purchase bonds sell bonds...
To reduce the Federal Funds rate the Federal Reserve would need to purchase bonds sell bonds increase the reserve requirements ratio none of the above
How does inflation factor into the Federal Reserve raising or lower interest rates?
How does inflation factor into the Federal Reserve raising or lower interest rates?
Explain two ways the Federal Reserve could raise the Federal Funds Rate without changing the Money...
Explain two ways the Federal Reserve could raise the Federal Funds Rate without changing the Money supply?
A possible reason that the Federal Reserve might raise interest rates in the economy is that...
A possible reason that the Federal Reserve might raise interest rates in the economy is that __________. A. there is a perception is that the economy is growing too strongly B. there is a fear that inflation will begin to increase soon C. there are some signs that wage gains are beginning to increase D. the level of unemployment has dropped below the natural rate of unemployment E. all of the above
Let’s say the Federal Reserve buys $20 Billion in bonds from private banks: *Total reserve requirement...
Let’s say the Federal Reserve buys $20 Billion in bonds from private banks: *Total reserve requirement = 0.10 x $1Trillion = $100 Billion What is the total amount (in $) of reserves that banks can lend? Using the simple deposit multiplier, how much additional money (M1) is created by this process? What will happen to the Federal Funds Rate, the prime rate, and other nominal interest rates in the economy? (Go up, down, stay the same?) Why? If the price...
Complete the following table: Federal Reserve Action Effect on the Money Supply (up or down?) Lower...
Complete the following table: Federal Reserve Action Effect on the Money Supply (up or down?) Lower the discount rate Conduct open market purchase Lower required reserve ratio Raise the discount rate Conduct open market sale Raise the required reserve ratio
1. When the inflation rate is 4 percent, the Bank of Canada will A) buy bonds...
1. When the inflation rate is 4 percent, the Bank of Canada will A) buy bonds to lower interest rates and shift the aggregate demand curve rightward. B) sell bonds to raise interest rates and shift the aggregate demand curve leftward. C) do nothing, since an interest rate of 4 percent is desirable. D) sell bonds to lower interest rates and accelerate the economy. E) buy bonds to raise interest rates and slow down the economy. 2. If the annual...
If the Federal Reserve wants interest rates to decrease, it will buy government bonds. True False
If the Federal Reserve wants interest rates to decrease, it will buy government bonds. True False
Interest rates are currently too high according to the Federal Reserve's economic plan. Using the model...
Interest rates are currently too high according to the Federal Reserve's economic plan. Using the model for liquidity preference, which of the below Federal Reserve policies will decrease interest rates? print less money increase the reserve ratio increase the discount rate buy bonds
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT