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If there is high inflation the federal reserve will want to increase the money supply?
Wiki User
∙ 13y ago
One of the two (according to the Keynesian) reason that can create high inflation is attributed to the increased money supply where "too much money chasing too few goods" Therefore, to reduce inflation, the Federal reserve would want to DECREASE the money supply.
However, the increase in money supply can create stimulus demand and depreciate the exchange rate of the US Dollars which are considered (although questionable) beneficial to the US economy.
Wiki User
∙ 13y ago
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What are three ways the federal reserve can affect the money supply?
It can put a reccesion or inflation.
The Federal Reserve wants to increase the money supply in the US. What is the Federal Reserve likely to do to accomplish this?
buy securities on the open market.
How does the federal reserve buy and sell government securities?
This is called open market operations, they do this to increase the money supply, buy buying bonds or decrease the money supply by selling. They do this to control interest rates and inflation.
Is the Federal Reserve responsible for determining the inflation rate and the unemployment rate?
The Federal Reserve does not set the inflation or unemployment rates. These rates are naturally fluctuating based on market activities. Typically, as inflation rises, unemployment decreases and vice versa (except in the case of stagflation in 1970's). The Federal Reserve DOES, however, adjust interest rates and various other rates to control the money supply in order to combat unemployment and inflation. See the "Money Supply Theory."
In a period of low inflation and economic recession, the federal reserve is expected to take which action?
Tightening the money supply
What are three ways the federal reserve can affect the money supply?
It can put a reccesion or inflation.
The Federal Reserve wants to increase the money supply in the US. What is the Federal Reserve likely to do to accomplish this?
buy securities on the open market.
How does the federal reserve buy and sell government securities?
This is called open market operations, they do this to increase the money supply, buy buying bonds or decrease the money supply by selling. They do this to control interest rates and inflation.
Is the Federal Reserve responsible for determining the inflation rate and the unemployment rate?
The Federal Reserve does not set the inflation or unemployment rates. These rates are naturally fluctuating based on market activities. Typically, as inflation rises, unemployment decreases and vice versa (except in the case of stagflation in 1970's). The Federal Reserve DOES, however, adjust interest rates and various other rates to control the money supply in order to combat unemployment and inflation. See the "Money Supply Theory."
In a period of low inflation and economic recession, the federal reserve is expected to take which action?
Tightening the money supply
What is the most likely effect of the Federal Reserve lowering the discount rate on overnight loans?
The most likely effect of the Federal Reserve lowering the discount rate on overnight loans would be an increase in the money supply. an increase in the money supply
What monetary policy strategy of the Federal Reserve do these headlines?
Decreasing the money supply to slow the economy
Why did the federal reserve increase the money supply during y2k scare?
they wanted to create a bubble.
When the federal reserve sells government securities to the public what happens to money supply?
If the Federal Reserve is a net seller of government bonds, what happens to the: • Money supply- A reduction in the money supply will increase short-term rates. • Interest rate- To the extent that the bond markets see this continuing, it will also reduce long term rates, which are based on the market's expectations of future inflation. • Economy- it drains money from the system
When the federal reserve puts money in a banking system?
When there are liquidity problems and/or when they want to increase money supply.
In periods of inflation the federal reserve should raise or lower the money?
Decreasing the money supply will help with inflation. With less money to spend, the demand for goods will decrease, bringing down their cost.
What government agency conducts monetary policy in the United States?
The Federal Reserve is responsible for managing the money supply in the U.S.
