ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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decrease; sales
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decrease; purchases
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increase; sales
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increase; purchases
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Detailed explanation-1: -Which of the following increases when the Fed makes open-market sales? borrow more from the Fed and lend more to the public.
Detailed explanation-2: -An increase in the discount rate makes it less profitable for banks to borrow from the Federal Reserve. As banks reduce their borrowing, the total reserves of the banking system are reduced and the quantity of money supplied by the banking system declines.
Detailed explanation-3: -Answer and Explanation: When the Federal Reserve conducts open market operations, it A. buys or sells government bonds. The money supply increases when buys bonds and decreases when sells bonds.
Detailed explanation-4: -Answer and Explanation: In open market, when the central bank conduct purchase of bonds, then the payment of those bonds by depositing the money into a bank’s reserves. This will help in increasing bank reserves.