To increase the money supply, the FOMC directs the trading desk, located at the

Question

To increase the money supply, the FOMC directs the trading desk, located at the Federal Reserve Bank of New York, to OA print U.S. Treasury securities and distribute them to banks. OB. buy U.S. dollars in the foreign exchange market. Oc. buy U.S. Treasury securities from the public. OD. sell U.S. Treasury securities to the public. By raising the discount rate, the Fed leads banks to make loans to households and firms, which will checking account deposits and the money supply. OA. more; increase OB. fewer, decrease OC. more; decrease OD. fewer, increase

Explanation / Answer

To increase the money supply , the FOMC directs the trading desk, located at the federal reserve bank of New York, to

Ans:- to buy U.S. Treasury securities from the public.

By raising the discount rate, the Fed leads banks to make fewer loans to household and firms, which will decrease checking account deposits and the money supply.

If the Fed uses monetary policy to keep real GDP at its full employment level, the inflation rate in 2017 will be 3.5 %

We would expect the Fed to pursue what type of policy in order to move AD2 to AD2 policy and reach equilibrium (point C) in the second period? Expansionary fiscal policy

If the Federal Reserve Bank’s policy is successful, what is the effect on the following macroeconomic indicators?

Actual real GDP: increases

Potential real GDP: does not change

Price Level: increases

Unemployment: decreases

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