The Fed will likely do what during a recession: buy bonds sell bonds increase the reserve requirement raise interest rates
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The Federal Reserve (the Fed) uses monetary policy to try to stimulate the economy. Show more…
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Breanna O.
Suppose banks decide to hold more excess reserves relative to deposits while the public retained the same currency to deposit ratio. This causes the money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds. fall. To reduce the impact of this the Fed could buy Treasury bonds. rise. To reduce the impact of this the Fed could sell Treasury bonds. rise. To reduce the impact of this the Fed could buy Treasury bonds.
Jennifer S.
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.
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