In: Economics
Suppose the U.S. economy was in both short-run and long-run equilibrium, until the economy experienced inflation.
a. Which policy would be consistent with the goals of monetary policy during this time?
The Fed repos $25 billion worth of Treasury bonds to non-bank financial firms.
The Fed reduces the discount rate from 7 percent to 5 percent.
The Fed reduces the reserve ratio from 20 percent to 15 percent.
The Fed sells securities worth $100 million to financial institutions.