0
Want this question answered?
Be notified when an answer is posted
Add your answer:
Earn +20 pts
What does it mean by contract the money supply?
It means to decrease, or lower, the money supply. EXAMPLE: The feds sold treasury bonds and bills in order to contract (decrease) money supply.
What change in monetary policy could eventually cause overborrowing and overinvestment?
a decrease in the money supply
What is the Effectof a decrease in money supply?
Deflation
If the fed increases the money supply what will happen to interest rates?
when money supply is increased, interest rates decrease
What effect does an increase in the money supply have on inflation?
An increase in the money supply shifts the money supply curve to the right. If you look on your graph, you will see that an increase in money supply will cause the interest rate to decrease. Here's why: Fed increases money supply-->excess supply of money at the current interest rate -->people buy bonds to get rid of their excess money-->increase in the prices of bonds --> decrease in the interest rate.
What does it mean by contract the money supply?
It means to decrease, or lower, the money supply. EXAMPLE: The feds sold treasury bonds and bills in order to contract (decrease) money supply.
What change in monetary policy could eventually cause overborrowing and overinvestment?
a decrease in the money supply
What is the Effectof a decrease in money supply?
Deflation
If the fed increases the money supply what will happen to interest rates?
when money supply is increased, interest rates decrease
What effect does an increase in the money supply have on inflation?
An increase in the money supply shifts the money supply curve to the right. If you look on your graph, you will see that an increase in money supply will cause the interest rate to decrease. Here's why: Fed increases money supply-->excess supply of money at the current interest rate -->people buy bonds to get rid of their excess money-->increase in the prices of bonds --> decrease in the interest rate.
Why is the supply of money in an economy not solely determined by central bank?
The supply of money IS controlled by the central bank. However, in some countries the politicians interfere with the Central Bank.
What do the Fed do to the money supply to discourage bank loans?
decrease
Tightening the money supply causes interest rates to do what?
Decrease
What is a fiscal policy designed to do?
Increase or decrease the money supply
An increase in the money supply is likely to decrease?
the prime rate
What is the solution to control inflation in an economy?
Decreasing the money supply. Monetary policies are concerned with the increase or decrease of the money supply.
Would cause a decrease in the supply of money?
raising of interest rates
