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If the Fed wants to slow the rate of consumer and investor spending, it would restrain the growth of money and credit. The decrease in money available in the economy leads to a decrease in investment and spending as the availability of capital decreases and it becomes more expensive to obtain. This limiting of access to capital slows down economic growth as investment decreases.
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∙ 15y ago
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What would fed do to interest rates if it wanted to fight inflation?
Use a monetary policy to decrease the money supply.
If the fed increases the money supply what will happen to interest rates?
when money supply is increased, interest rates decrease
Which of the following can the Fed accomplish by raising or lowering the required reserve ratio?
Increase or decrease the money supply
If the FED decreases the money supply in the short-run what happens?
According to the great Milton Friedman, a decrease in the money supply is was a major contributor to The Great Depression. As far as I can tell, the only reason the FED would do this is to cause massive sell offs of assists in order for people who are in cahoots with the FED to buy up everything on discount.
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 would fed do to interest rates if it wanted to fight inflation?
Use a monetary policy to decrease the money supply.
What do the Fed do to the money supply to discourage bank loans?
decrease
If the fed increases the money supply what will happen to interest rates?
when money supply is increased, interest rates decrease
Which of the following can the Fed accomplish by raising or lowering the required reserve ratio?
Increase or decrease the money supply
If the FED decreases the money supply in the short-run what happens?
According to the great Milton Friedman, a decrease in the money supply is was a major contributor to The Great Depression. As far as I can tell, the only reason the FED would do this is to cause massive sell offs of assists in order for people who are in cahoots with the FED to buy up everything on discount.
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 in order to reduce the money supply the Fed might sell securities in the open market operations?
Because that is how FED removes money from circulation, thus reducing money supply. The opposite would be buying securities in open market operations in order to increase money supply.
Who determines the money supply?
Fed
The fed chairman is in control of?
Money supply.
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 is the primary way the feds control the supply of money?
The primary way the Fed controls the supply of money is by:
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.
