Question

20. All else equal, when the Fed purchases government bonds, the money supply curve shifts to...

20. All else equal, when the Fed purchases government bonds, the money supply curve shifts to the ________ and the equilibrium interest rate ________.

  1. left; rises

  2. right; rises

  3. right; falls

  4. left; falls

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Option C.

  • When Fed wants to increase the money supply in the economy, it purchases government securities from open markets through open market operations.
  • This action of Fed will lead to an increase in money supply and the inflation rates in the economy. The amount of reserves held by the banks also increases which allows them to lend more to the public. But the interest rates fall as a result of this action.
  • This will shift the money supply curve to the right and the equilibrium Interest rate falls.
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
1. If there is an excess supply of money a) the real money supply shifts left...
1. If there is an excess supply of money a) the real money supply shifts left to make an equilibrium b)the interest rate falls c)the interest rate stays constant, but consumer confidence falters. d)the interest rate rises e)the real money supply shifts right to make an equilibrium
1. If there is an excess supply of money a) the real money supply shifts left...
1. If there is an excess supply of money a) the real money supply shifts left to make an equilibrium b)the interest rate falls c)the interest rate stays constant, but consumer confidence falters. d)the interest rate rises e)the real money supply shifts right to make an equilibrium
Suppose that the Fed makes a $100 billion open-market sale of Treasury bonds, and the money...
Suppose that the Fed makes a $100 billion open-market sale of Treasury bonds, and the money multiplier is 6. Which of the following impacts are most likely to result? a. The money supply shifts inward, and the equilibrium interest rate rises in the money market. b. The money supply shifts outward, and the equilibrium interest rate falls in the money market. c. Investment declines, causing the aggregate demand curve to shift leftward, reducing equilibrium real GDP and thus slowing the...
2) The Federal Reserve issues a report indicating that future inflation will be higher than had...
2) The Federal Reserve issues a report indicating that future inflation will be higher than had previously seemed likely. As a result A) the supply curve for bonds shifts to the right. B) the demand curve for loanable funds shifts to the left. C) the equilibrium interest rate falls. D) the equilibrium price of bonds rises. Answer: A 7) As a result of higher expected inflation A) the demand and supply curves for bonds both shift to the right and...
When the expected future price of a good falls, the supply curve shifts to the right...
When the expected future price of a good falls, the supply curve shifts to the right and the demand curve shifts to the left simultaneously. What happens to the equilibrium price after the shifts? What happens to the equilibrium quantity after the shifts? Is it always possible to determine the direction of change in both the equilibrium price and quantity or is more information necessary? Use supply and demand curves to graphically illustrate your answer 7.0.3
1. When the Fed purchases government bonds, that tends to ___ the federal funds rate and...
1. When the Fed purchases government bonds, that tends to ___ the federal funds rate and ___ the prime rate. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease e. None of the above 2. How does the Federal Reserve affect the supply of money using open market operations? a. The Fed increases the reserve requirements of bank and thus banks must obtain additional funds from the Fed. b. The Fed buys government bonds from banks, which...
When there is a decrease in supply, all else held equal, equilibrium price falls, demand increases,...
When there is a decrease in supply, all else held equal, equilibrium price falls, demand increases, and equilibrium quantity increases. equilibrium price falls, demand does not change, and equilibrium quantity increases. equilibrium price rises, quantity demanded decreases, and equilibrium quantity decreases. equilibrium price falls, quantity demanded decreases, and equilibrium quantity decreases. equilibrium price rises, demand does not change, and equilibrium quantity increases.
If the supply of money increases, what happens in the IS-LM framework? The LM curve shifts...
If the supply of money increases, what happens in the IS-LM framework? The LM curve shifts left. The LM curve shifts right. The IS curve shifts right. The IS curve shifts left.
When the federal government's budget deficit decreases, the aggregate___________ curve for bonds shifts to the____________. supply;...
When the federal government's budget deficit decreases, the aggregate___________ curve for bonds shifts to the____________. supply; right. supply; left. demand; left. demand; right. Can't Tell from the information provided
1. Suppose that the Fed makes a $100 billion open-market sale of Treasury bonds, and the...
1. Suppose that the Fed makes a $100 billion open-market sale of Treasury bonds, and the money multiplier is 6. Which of the following impacts are most likely to result? a. The money supply shifts inward, and the equilibrium interest rate rises in the money market. b. The money supply shifts outward, and the equilibrium interest rate falls in the money market. c. Investment declines, causing the aggregate demand curve to shift leftward, reducing equilibrium real GDP and thus slowing...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT