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If the Federal Reserve increases the reserve requirement and velocity remains stable What will happen to nominal GDP and why?
A significant increase in reserve requirements will reduce the lending of member banks resulting in a relatively smaller supply of M2 money.
Money can bought and sold repeatedly by each stock speculator throughout the day. Just look at the volume netted and cleared by stock speculators on a daily basis. Therefore velocity has no obvious unambiguous meaning outside of something like nominal GDP divided by money supply. Therefore by this definition a decrease in money supply must be countered with a decrease in GDP to keep velocity stable.
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If the federal reserve increases the reserve requirement what effect will this have on the nations money supply?
If the Federal Reserve increases the reserve requirement, banks must hold a larger percentage of their deposits as reserves and can lend out less money. This reduction in lending capacity typically leads to a decrease in the overall money supply in the economy. Consequently, it can result in tighter credit conditions, potentially slowing economic growth and increasing interest rates.
The Federal Reserve is divided into how many districts?
The three main tools of the Federal Reserve are: Change the Reserve Requirement Change the Discount Rate Open-Market Operations
What is Reserve requirement ratio?
The Required Reserve Ratio is the percentage/fraction of required reserves that should be held for every dollar of deposits in a depository institution that is required by the Federal Reserve.
Which of these officers of the Federal Reserve has the power to determine what the margin requirement will be for member banks?
Board of Governors
Does purchase of government bonds from the public by the federal reserve banks increases commercial banks reserves?
yes
If the federal reserve increases the reserve requirement what effect will this have on the nations money supply?
If the Federal Reserve increases the reserve requirement, banks must hold a larger percentage of their deposits as reserves and can lend out less money. This reduction in lending capacity typically leads to a decrease in the overall money supply in the economy. Consequently, it can result in tighter credit conditions, potentially slowing economic growth and increasing interest rates.
The Federal Reserve is divided into how many districts?
The three main tools of the Federal Reserve are: Change the Reserve Requirement Change the Discount Rate Open-Market Operations
In reference to federal reserve policy what are reserve requirement?
the percentage of a bank's total deposits that must be kept in its possession
The of the Federal Reserve has the power to determine what the margin requirement will be for member banks?
Board of Governors
Why did the federal reserve try to regulate margin loans and why were it's efforts only partly successful?
The Federal Reserve tried to regulate margin loans to gain control of margin requirements for stocks bought on margin. Regulation T gives the Federal Reserve the authority to change the percentage of the initial margin requirement for margin stock. Since 1974 the Federal Reserve has not deemed it necessary to adjust the margin requirement
What office of the Federal Reserve has the power to determine what the margin requirement will be for member banks?
ANSWER:board of governors
When the federal reserve decreases the money supply it generally does by selling bonds true or false?
It is true that when the Federal Reserve decreases the money supply it generally does by selling bonds. When the Federal Reserve sells bonds it pushes prices down and increases rates.
What is Reserve requirement ratio?
The Required Reserve Ratio is the percentage/fraction of required reserves that should be held for every dollar of deposits in a depository institution that is required by the Federal Reserve.
Which of these officers of the Federal Reserve has the power to determine what the margin requirement will be for member banks?
Board of Governors
How does the federal reserve influence local economics?
The Federal Reserve impacts local economics by impacting local loan rates. The overall movement of rates increases or decreases disposable income and the resultant spending.
What would most likely happen if the federal reserve decided to increase the reserve requirements in banks?
If the Federal Reserve decided to increase the reserve requirement in banks, it is likely that banks would be targeted more often for robbery. This would be because there would be more money in every federally-insured bank.
Does purchase of government bonds from the public by the federal reserve banks increases commercial banks reserves?
yes
