I got these wrong... Which one of the following actions by the Federal Reserve w
ID: 1152493 • Letter: I
Question
I got these wrong...
Which one of the following actions by the Federal Reserve would likely decrease the money supply?
Question options:
The Fed reduces the discount rate
The Fed increases the reserve requirements for banks
The Fed purchases government bonds on the open market
The Fed increases the monetary base
None of the above
which one of the following statements best summarizes the Federal Reserve’s monetary policy over the years 2000-2006?
The Federal Reserve has tried to keep the federal funds rate constant
The Federal Reserve continually lowered the federal funds rate to promote economic growth
The Federal Reserve continually increased the federal funds rate to prevent inflation
The Federal Reserve initially lowered the federal funds rate to avoid a recession but then increased the federal funds rate to avoid inflation
The Federal Reserve initially increased the federal funds rate to avoid inflation but then lowered the federal funds rate to avoid a recession
The Fed reduces the discount rate
The Fed increases the reserve requirements for banks
The Fed purchases government bonds on the open market
The Fed increases the monetary base
None of the above
which one of the following statements best summarizes the Federal Reserve’s monetary policy over the years 2000-2006?
Question options:The Federal Reserve has tried to keep the federal funds rate constant
The Federal Reserve continually lowered the federal funds rate to promote economic growth
The Federal Reserve continually increased the federal funds rate to prevent inflation
The Federal Reserve initially lowered the federal funds rate to avoid a recession but then increased the federal funds rate to avoid inflation
The Federal Reserve initially increased the federal funds rate to avoid inflation but then lowered the federal funds rate to avoid a recession
Explanation / Answer
Ans:
1) The Fed increases the reserve requirements for banks.
The reserve requirements is the percentage of reserves a bank holds against deposits.A increase in the reserve requirement decreases the money supply.
2) The Federal Reserve initially lowered the federal funds rate to avoid a recession but then increased the federal funds rate to avoid inflation.
During 2000- 2006, initially federal fund rate was lowered to increase economic activity and then increased to control inflation.
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