If the interest rate on reserves is 2% and the federal funds rate is 2%, an open market sale will result in ____ the federal funds rate. an increase in no change in a decrease in
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The interest rate on reserves is the rate at which banks earn interest on the reserves they hold at the Federal Reserve. In this case, it is 2%. Show more…
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If the Fed wants to increase the money supply, it can BUY OR SELL bonds in open-market operations. If the Fed reduces the reserve requirement, the money supply INCREASES OR DECREASES. If the Fed wants to increase the money supply, it can INCREASE OR DECREASE the interest rate it pays on reserves. When the FOMC decreases its target for the federal funds rate, the money supply will INCREASE OR DECREASE. If bankers decide to hold more excess reserves because they are fearful of bank runs, the money supply DECREASES OR INCREASES.
Andrew D.
Assume that the reserve-deposit ratio is 0.2. The Federal Reserve carries out open-market operations, purchasing $1,000,000 worth of bonds from banks. This action increased the money supply by $2,600,000. What is the currency-deposit ratio?
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Suppose that the Federal Reserve conducts an open market sale. Everything else, including the public's expectation on inflation, held constant, this will cause the demand for U.S. assets to ________ and the U.S. dollar will ________. increase; appreciate decrease; depreciate decrease; appreciate increase; depreciate
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