Question

Clarification on topics revolving around of the Fed's Functions & the consiquences felt from particular actions (Policy)

Question 17:

Part 1: An open-market purchase of government bonds by the Fed results in ________ in bank reserves and ________ in the supply of money.

A) an increase; a decrease B) a decrease; an increase C) a decrease; a decrease D) an increase; an increase

Part 2: Which of the following represents an action by the Federal Reserve that is designed to increase the money supply?

A) an increase in the discount rate B) a decrease in federal spending C) an increase in the required reserve ratio D) buying government bonds in the open market

Part 3: An example of a tool used by the Fed that decreases the money supply is:

A) a decrease in the discount rate. B) a decrease in the federal funds rate. C) a decrease in the required reserve ratio. D) the Fed selling government bonds in the open market.

Part 4: A decrease in the required reserve ratio:

A) will increase the money supply. C) will decrease the money supply. B) will not change the money supply. D) will decrease the discount rate.

Part 5: Which of the following is an example of a Federal Reserve action that increases the money supply?

A) a decrease in the discount rate B) the Fed selling government bonds in the open market C) an increase in the required reserve ratio D) an increase in the federal funds rate

Part 6:  An example of a Federal Reserve action that decreases the money supply is:

a.)  a reduction in the taxes banks pay on their profits. B) the Fed buying government bonds in the open market. C) a decrease in the discount rate. D) an increase in the required reserve ratio.

Answer 1