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What type of policy does the federal reserve use to counteract an expansion that is causing high interest rates?
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∙ 15y ago
According to Economic theory, if the money supply expands, interest rates decrease. All things being equal an expansion in money supply will lead to lower interest rates: 1. Completel Equilibrium (money demanded = money supplied) 2. Monetary expansion (Money demaned < Money supply) 3. Reduce interest rates (increases opportunity cost of savings and so consumers spend more). 4. Money demand = money supply
Wiki User
∙ 15y ago
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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.
How the Federal Reserve can influence the federal funds interest rate?
If the Fed wants to raise the federal funds interest rate, it will sell securities to remove reserves from the banking system.
How does the Fed influence interest rates?
The Federal Reserve controls the interest rate at which federal banks lend money. This, in turn, has a cascading effect, in which other banks interest rates are determined based on the rate set by the Fed.
What interest rate does the fed directly control?
The Federal Reserve System implements its monetary policy by controlling the federal funds rate, which is the interest rate for interbank lending operations.
When the federal reserve board lowers interest rates it most likely attempting to?
lower interest rates.
What type of policy does the federal reserve used to counteract an expansion that causing high interest rates?
According to Economic theory, if the money supply expands, interest rates decrease. All things being equal an expansion in money supply will lead to lower interest rates: 1. Completel Equilibrium (money demanded = money supplied) 2. Monetary expansion (Money demaned < Money supply) 3. Reduce interest rates (increases opportunity cost of savings and so consumers spend more). 4. Money demand = money supply
How can the Federal Reserve counteract an inflationany gap?
The only way to exercise control is to vary the supply of money. In terms if control exerciseable by "the Fed", AIUI the only thing they can do is to change their interest rates.
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.
How do republican and democratic views on federal government expansion?
Republican and Democratic views can vary. Conservatives (Republicans) are generally very against any government expansion while liberals (Democrats) are generally in favor of federal or state government expansion.
Can interest be charged on child support interest?
No... this is illegal..(Federal).....no intrest can be charged on owed interest.
How the Federal Reserve can influence the federal funds interest rate?
If the Fed wants to raise the federal funds interest rate, it will sell securities to remove reserves from the banking system.
Interest groups the federal bureaucracy and Congress make up the so-called .?
Interest groups the federal bureaucracy and Congress form the iron triangle.
Interest groups the federal bureaucracy and Congress make up the so-called?
Interest groups the federal bureaucracy and Congress form the iron triangle.
What is the maximum interest rate for a student loan consolidation loan?
The maximum interest rate for consolidating FEDERAL student loans is 8.25%. If your student loans are not federal loans, though, there is no maximum interest rate.
Which types of loans have the lowest interest rates?
Federal
Are federal loans n private loans similar?
No, federal usually have lower interest rates.
How are prime interest rates determined?
The Federal Funds Rate, which is the interest rate banks charge each other, is determined eight times a year by the Federal Open Market Committee (FOMC). The prime interest rate usually runs about 3% above the Federal Funds Rate.
