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The Old System-Tools of FED in a Limited Reserve System

Last updated about 1 year ago

3 questions

1

1

1

Question 1

1.

Sort the following tools into increasing and decreasing the money supply.

Decrease the DR
(FED) Sell Bonds
Influence a Decrease in the FFR

Question 2

2.

Sort the following into expansionary and contractionary monetary policy.

Influence a Decrease in the FFR
Increase the RR
Influence an Increase in the FFR

Question 3

3.

Influence an Increase in the FFR

(FED) Buy Bonds

Increase the RR

Decrease the RR

Increase the DR

Increase the Money Supply

Decrease the Money Supply

Decrease the RR

Increase the DR

(FED) Less Buying OMOs

Decrease the DR

(FED) More Buying OMOs

Expansionary Monetary Policy

Contractionary Monetary Policy

Sort into the appropriate category

Qd of Money < Qs of Money

Nominal Interest Rates Rise

The Fed does more purchasing OMOs

Qd of Money > Qs of Money

The Fed influences an increase in the Federal Funds Rate.

Deflation hits the US economy

The Fed lowers the reserve requirement.

The Fed increases the discount rate

Credit cards increase their average percentage rates (APRs)

Banks raise ATM fees

Nominal Interest Rates Fall

The economy is booming and more households are finding employment

Supply of Money Increases

Supply of Money Decreases

Demand of Money Increases

Demand of Money Decreases

Shortage of Money

Surplus of Money