25) Suppose, at a given federal funds rate, there is an excess supply of reserve
ID: 1109844 • Letter: 2
Question
25) Suppose, at a given federal funds rate, there is an excess supply of reserves in the federal funds market. If the Fed wants the federal funds rate to stay at that level, then it should undertake an open market ________ of bonds, everything else held constant. If the Fed does nothing, however, the federal funds rate will ________.
A) purchase; increase B) sale; decrease C) purchase; decrease D) sale; increase
26) Open market sales shrink ________ thereby lowering ________.
A) the money multiplier; the money supply
B) the money multiplier; reserves and the monetary base
C) the money base; the money multiplier
D) reserves and the monetary base; the money supply
27) If the Fed expects currency holdings to fall, it conducts open market ________ to offset the expected ________ in reserves.
A) purchases; increase B) sales; increase C) purchases; decrease D) sales; decrease
Explanation / Answer
25.
sale; decrease
the above is the answer as sale of bonds would take liquidity out of market offseting decrease drive in rate.
26.
reserves and the monetary base; the money supply
the above is the answer
27.
sales; increase
the above is the answer
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.