How does the US provide the money demand in the last few decades, especially when the...

How does the US provide the money demand in the last few decades, especially when the domestic money demand is much larger than domestic money supply.

Expert Solution

In last few decades fed reserve and government has supplied money in the market through fiscal policy measure and monetary policy.

Under fiscal policy measure usa government increase money supply through budgetary policy of expansion as done to fight with financial crisis of 2008 and create demand .before 2008 crisis fed reserve supplies money in the market by purchasing government bond through open market operation .fed reserve also supplies money through expansionary monetary policy or by decrease interest rate on lending and by decreasing reserve required in the form of crr and slr (LAF.. Liquidity adjustment facility) to full fill basel norms. Money supply also regulated through credit rationing for required sector of economy. Government also increase money supply through government borrowing from financial institutions (domestic and foreign or international like imf world Bank).

Government also increase money supply through lowering tax rate or taxation amount or giving subsidies as fiscal tool.

Rahul Sunny answered 2 years ago

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How does the US provide the money demand in the last few decades, especially when the...

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