Question

Explain the dynamics resulting from an open market purchase or sale. Explain when an open market...

Explain the dynamics resulting from an open market purchase or sale. Explain when an open market purchase is favorable or when an open market sale is favorable. Specifically, assume the sale or purchase to happen $100 must be printed or retired from circulation when the multiplier is 2. In your explanation discuss and distinguish what happens to money supply, the monetary base, and how the money multiplier works. Be sure to indicate the direction of money flows.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution:

Given that,

Dynamics resulting from an open market purchase or sale

Sale or purchase to happen $100

   Multiplier is 2.

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
Suppose the Federal Reserve conducts and open market purchase of $800. The nonbank public holds the...
Suppose the Federal Reserve conducts and open market purchase of $800. The nonbank public holds the same fraction of currency relative to deposits. Banks hold the same fraction of excess reserves, and the Fed keeps the reserve requirement unchanged. Compute the change in the monetary base, and the change in the money supply and be sure to indicate the direction of the change in both variables.
Explain the impact on the Fed's balance sheet from a $10 million open market purchase of...
Explain the impact on the Fed's balance sheet from a $10 million open market purchase of U.S. Treasury Securities. Be sure to identify which categories of assets and liabilities change and by what amounts.
Provide a brief explanation or show work 5. The ratio of the money supply to the...
Provide a brief explanation or show work 5. The ratio of the money supply to the monetary base is called: a. the currency–deposit ratio. b. the reserve–deposit ratio. c. high-powered money. d. the money multiplier. 6. When the Fed makes an open-market sale, it: a. increases the money multiplier (m). b. increases the currency–deposit ratio (cr). c. increases the monetary base (B). d. decreases the monetary base (B). 7. Suppose the banking system currently has $400 billion in reserves, the...
1. When the U.S. dollar depreciates relative to other major currencies, what would happen to exports...
1. When the U.S. dollar depreciates relative to other major currencies, what would happen to exports and imports of goods and services from and to the United States? Is it good for domestic firms exporting goods and services? Is it good for domestic portfolio investors who may purchase foreign assets? 2. When the Federal Reserve conducts an expansionary monetary policy (increasing its monetary base), what would happen to the domestic money supply? Does this also affect the supply of dollar...
Suppose the Bank of Canada buys $5 million worth of government securities from CBA, a commercial...
Suppose the Bank of Canada buys $5 million worth of government securities from CBA, a commercial bank. a) Using T-account analysis, show what happens to the balance sheets of the BoC and CBA immediately. b) If CBA does not want to hold any excess reserves, it will make more loans. Show the change for its balance sheet reflecting this lending. c) Using T-account analysis, show what happens to the balance sheet of the CBA when the borrower withdraws cash from...
Provide a brief explanation or show work 1. In the United States, the money supply is...
Provide a brief explanation or show work 1. In the United States, the money supply is determined: a. only by the Fed. b. only by the behavior of individuals who hold money and of banks in which money is held. c. jointly by the Fed and by the behavior of individuals who hold money and of banks in which money is held. d. according to a constant-growth-rate rule 2. In a 100-percent-reserve banking system, if a customer deposits $100 of...
1) Open market purchase will result in: increase in bank reserves and a decrease in the...
1) Open market purchase will result in: increase in bank reserves and a decrease in the federal funds rate. increase in bank reserves and an increase in the federal funds rate. decrease in bank reserves and a decrease in the federal funds rate. decrease in bank reserves and an increase in the federal funds rate. 2) An increase in government expenditure would shift the: A) aggregate demand curve rightward. aggregate demand curve leftward. aggregate supply curve rightward. aggregate supply curve...
INTRO NewForm IT is a seven-year-old IT consulting company founded in 2012 that provides services to...
INTRO NewForm IT is a seven-year-old IT consulting company founded in 2012 that provides services to small businesses in their local and regional area. NewForm employs 83 people, 61 of whom are IT professionals/ consultants. NewForm is struggling financially; it has not met its revenue projections in the last five quarters. NewForm has suffered excessive leadership turnover in the past three years. The original founders sold NewForm in 2015; one of them, James Stanton, remained on as CHRO but sold...
INTRO NewForm IT is a seven-year-old IT consulting company founded in 2012 that provides services to...
INTRO NewForm IT is a seven-year-old IT consulting company founded in 2012 that provides services to small businesses in their local and regional area. NewForm employs 83 people, 61 of whom are IT professionals/ consultants. NewForm is struggling financially; it has not met its revenue projections in the last five quarters. NewForm has suffered excessive leadership turnover in the past three years. The original founders sold NewForm in 2015; one of them, James Stanton, remained on as CHRO but sold...
Please read the article and answear about questions. Determining the Value of the Business After you...
Please read the article and answear about questions. Determining the Value of the Business After you have completed a thorough and exacting investigation, you need to analyze all the infor- mation you have gathered. This is the time to consult with your business, financial, and legal advis- ers to arrive at an estimate of the value of the business. Outside advisers are impartial and are more likely to see the bad things about the business than are you. You should...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT