36. If the Fed used \"open market operations\" to decrease the money supply, it
ID: 1125205 • Letter: 3
Question
36. If the Fed used "open market operations" to decrease the money supply, it a. increased the federal funds rate. issued more federal government debt. c. b. sold U.S. government securities (bonds) to the general public d. increased the required reserve ratio. 37. Suppose the Fed buys $10 million of U.S. securities from the public. Assume a reserve requirement of S percent and that all banks hold no excess reserves. The total impact of this action on the money supply will be a. an increase of $200 million. b. a decrease of $200 million. c. a decrease of $10 million. d. an increase of $10 million. The total expansion in the money supply can be less than is predicted by the deposit expansion multipl if a. banks choose to hold some excess reserves rather than lending all excess reserves b. some individuals prefer to hold cash instead of depositing their money in banks. c. instead of a monopoly banking system, there are many banks. d. both a and b are correct. 38· If the required reserve ratio is 20 percent and commercial bankers decide to hold additional excess for the banking system will be: b. 4 39. reserves equal to 5 percent of any newly acquired demand deposits, then the effective monetary multi In the short run, an increase in the money supply will a. increase interest rates and shift the aggregate demand curve to the left. b. increase interest rates and shift the aggregate demand curve to the right. c. lower interest rates and shift the aggregate demand curve to the left. d. lower interest rates and shift the aggregate demand curve to the right. 40.Explanation / Answer
36) The answer is C-) sold U.S government securities to the general public.
because an open market operation consist fo buying and selling of U.S government securities. when Fed wants to increase the money supply, it purchase government securities from the public and when it want to decrease the money supply it sells the government securities to the public .
37) The answer is A -) An increase of $200 million .
38) The answer is D-) Both a and B are correct.
39) The answer is D -) 6.
40) The answer is D -) Lower the interest rates and shift the aggregate demand curve to the right.
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