0
When looking to decrease inflation, and the real GDP level is above full employment.
Wiki User
∙ 15y ago
Wiki User
∙ 10y agoThe economy is expanding quickly and inflation is a concern.
Add your answer:
Earn +20 pts
What problem does tight money policy combat?
tight money policy combats inflation (when to much money is out in circulation the Fed limits the amount of money that is in Circulation known as the tight money policy.)
What type of policy does the fed to counteract a contraction?
The fed uses an expansionary monetary policy when dealing with a contraction. On the other hand, when dealing with a expansion that is resulting in higher interest rates, the fed uses a tight money policy.
What type of policy does the fed use to counteract a contraction?
The fed uses an expansionary monetary policy when dealing with a contraction. On the other hand, when dealing with a expansion that is resulting in higher interest rates, the fed uses a tight money policy.
What would fed do to interest rates if it wanted to fight inflation?
Use a monetary policy to decrease the money supply.
When the fed wants to ease a tight money supply they will?
issue new treasury securities
If the fed wants to increase the money supply it should?
If the Fed wants to increase the money supply, they should buy the government bonds. The actions that can be used by the Fed to increase the money supplied is called the monetary policy.
What type of policy should the federal reserve use to countract a rapid expansion that is causing high inflation?
If the economy is experiencing a rapid expansion that may cause high inflation, the fed may introduce a tight money policy, That is, it will reduce the money supply. The fed reduces the montey supply to push interest rates upward. By raising interest rates, the Fed causes investment spending to decline. This brings real GDP down, too.
If the demand for money increases and the fed wants interest rates to remain unchanged what would be an appropriate policy?
Buy bonds in the open market
Describe the effect that The Fed raises the discount rate from 5 percent to 10 percentwill have on the money supply?
If the Fed raises the discount rate from five percent to ten percent, there would be less money supply. This is because it is a contractionary monetary policy.
What are the monetary tools policy?
The Fed, Federal Reserve System, has three tools to use for its monetary policy. 1. Open Operations - buying or selling securities from the privite sector to control money supply. 2. Discount Loans - Setting discount rate that privite sector banks would need to pay the Fed to borrow money from them. 3. Reserve requirements - sets amount of money banks must have in their vaults in case customers come take money out. The Fed's current monetary policy is price stability and implicitly controling inflation.
What did the Federal Reserve refuse to do in order to keep a run on the banks from causing a failure of the US banking system?
The Fed refused to enact a tight monetary policy by tightening the monetary policy to stop inflation.
What is the policy used most by the Fed to change the money supply?
interest rates
