Which of the following actions by the Fed would lead to an increase in the money supply Quizlet

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Which of the following actions by the Fed would cause the money supply to increase?
Which of the following actions by the Fed would lead to an increase in the money supply part 2?
Which of the following will increase with an increase in the money supply?
Which of the following actions by the Fed would increase the money supply reducing the required reserve ratio?

Terms in this set (170)

Suppose the Fed sells a $50,000 U.S. Treasury security to Martha, a member of the public. If Martha writes a check to the Fed in order to buy this security, the money in her checking account will be transferred to
a. the Fed, and now the Fed will have $50,000 more in reserves than it had before.
b. her bank, and now her bank will have $50,000 more in reserves than it had before.
c. the Fed, and now it is as if the money doesn't exist.
d. the Treasury, and now the Treasury will have $50,000 more in reserves than it had before.

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Which of the following actions by the Fed would cause the money supply to increase?

To increase the (growth of the) money supply, the Fed could either buy bonds, lower the reserve requirement ratio, or lower the discount rate. To decrease the (growth of the) money supply, the Fed could either sell bonds, raise the reserve requirement ratio, or raise the discount rate.

Which of the following actions by the Fed would lead to an increase in the money supply part 2?

Which of the following actions by the Fed would lead to an increase in the money supply? reduce the rate of inflation.

Which of the following will increase with an increase in the money supply?

According to monetarists, a rapid increase in the money supply can lead to a rapid increase in inflation. This is because when money growth surpasses the growth of economic output, there is too much money backing too little production of goods and services.

Which of the following actions by the Fed would increase the money supply reducing the required reserve ratio?

The correct answer is a. When the Fed wants to increase the money supply, it implements an expansionary monetary policy. This type of policy includes the decrease of the discount rate, the purchase of government securities, and the reduction of the reserve requirement ratio.