The monetary base increased by 20% during the contraction of 1929‐1933, but the money supply fell by 25%. Explain why this occurred. How can the money supply fall when the base increases?
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The monetary base increased by 20% during the contraction of 1929‐1933, but the money supply fell by 25%. Explain why this occurred. How can the money supply fall when the base increases?
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- Which of the following statements help to explain why, in the real world, the Fed cannot precisely control the money supply? Check all that apply. The Fed cannot prevent banks from lending out required reserves. The Fed cannot control whether and to what extent banks hold excess reserves. The Fed cannot control the amount of money that households choose to hold as currency.The Federal Reserve manages the amount of money in circulation by buying or selling U.S. Treasury securities, usually Treasury bills. The increase or decrease of money in circulation helps the Fed to control inflation or deflation. This has an effect on your disposable income. Research the Federal Reserve system and money supply, then answer the following questions. Under what conditions would the Fed choose to decrease the money supply, how would it do so, and what is the goal of doing so? How does the Fed factor inflation into its actions?Between 1950 and 1975, the average annual rate of change in the money supply was slightly less than 4 percent. Has the Fed expanded the money supply more (or less) rapidly than this 4 percent long-term rate during the past 12 months? The past 24 months? Is the Fed's current monetary policy restrictive or expansionary? Explain.
- Currently, the Fed does not have complete control of the money supply because the Congress and the Treasury can also make changes to the money supply. government bonds may not be available for purchase when the Fed wants to perform OMO. the Fed does not know where all the U.S. currency is located. the amount of money in the real economy depends on the behavior of depositors and bankers. All of the above are correct.Assume the economy is suffering from massive inflation and you are the Chairperson of the FED. What type of monetary policy would you employ and describe what changes are made to the “three tools” of monetary policy. Describe the subsequent impact on the money supply, interest rates, aggregate spending, and real GDP.The U.S. Treasury maintains accounts at commercial banks. What would be the consequences for the money supply if the Treasury shifted funds from one of those banks to the Fed?
- During the great depression, the US economy in 1932 experienced an inflation rate of -10.3%. The GDP decreased from 905 billion to 788 billion, a decrease of 12.9%. Which of the following Monetary Policy changes would be appropriate? Increase the Money Supply and lower interest rates. Decrease the Money Supply and increase interest rates. Increase the Money Supply and increase interest rates. Decrease the Money Supply and lower interest rates.Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve requirement is 5%. What is the maximum possible increase in the money supply as a result of your bank deposit? maximum increase: $ Which events could cause the increase in the money supply to be less than its potential? Banks choose to loan out all excess reserves. Some loan recipients choose to hold some cash instead of depositing all of it in banks. Banks decide to keep some excess reserves on hand. All money loaned out is deposited back into the banking system.The U.S. money supply (M1) at the beginning of 2015 was $2,683.3 billion broken down as follows: $1,165.7 billion in currency, $3.5 billion in traveler's checks, and $1,514.1 billion in checking deposits. Suppose the Fed decided to increase the money supply by decreasing the reserve requirement from 11 percent to 10 percent. Assume all banks were initially loaned up (had no excess reserves) and the quantity of currency and traveler's checks held outside of banks did not change. How large a change in the money supply would have resulted from the change in the reserve requirement? The money supply would change by $ billion. (Round your response to two decimal places and include a minus sign if necessary.)
- When the Fed targets the amount of money in the economy, interest rates become more variable. True FalseWhat are the goals of monetary policy? maximum employment and stable prices zero unemployment and zero inflation zero unemployment and stable prices maximum employment and zero inflation The Federal Reserve seeks to achieve these goals by choosing between maximum employment and stable prices in the long run. maintaining both the money supply and short-term interest rates at low levels. keeping the growth rate of money consistent with the growth rate of the natural rate of output. targeting short-term interest rates and the money supply.
