If there is an increase in the price of oil and the Federal Reserve wants to maintain output stability, it should
decrease taxes
sell bonds
buy bonds
more than one answer is correct
increase taxes
Option 4: more than one answer is correct
decrease taxes and buy bonds
Increase in oil price causes general price level to rise and output to fall. This condition is known as stagflation characterised by leftward shift in the aggregate supply curve. To maintain output stability Federal should look to shift the aggregate demand curve to the right to restore the output level. This can be done by reducing taxes or buying bonds through open market operations. Reducing taxes would leave public with greater disposable amount and hence demand will increase. Buying bonds will increase the money supply and here also public will be left with greater amount in hand, which will boost the consumption expenditure in the economy. Both of the cases will cause aggregate demand curve to shift to the right.
If there is an increase in the price of oil and the Federal Reserve wants to maintain output stability, it should
When it wants to change interest rates, the Federal Reserve (Fed) buys or sells government securities, which is referred to as open market operations. If the Fed wants to decrease interest rates, it should ________ government securities. a. buy n. neither buy or sell c. sell d. decrease the taxes investors pay on their investments
Suppose that the federal reserve has decided to increase the reserve requirement. Congress worries about the short run effect that this might have on GDP, so to offset this action, they could...A. decrease taxes.B. decrease government spending.C. buy government bonds in open market operations.D. increase the discount rate.E. do nothing, because output will not change anyhow.F. do nothing, because they cannot prevent changes in output anyhow.
Unlike the Federal Reserve, the European Central Bank's (ECBs) primary mandate is to promote price stability (low inflation). In response to a negative technology shock (negative real shock), like the one that associated with the Great Recession, we would expect the ECB to Group of answer choices decrease the growth rate of the money supply and push real GDP growth lower. decrease the growth rate of the money supply and push real GDP growth higher. increase the growth rate of...
The Federal Reserve wishes to decrease unemployment in the United States. What would be an appropriate policy? sell government bonds on the open market increase reserve requirement buy government bonds on the open market increase the discount rate
The Federal Reserve wants to increase the supply of reserves, so it purchases $1 million of bonds from the public. Show the effect of this open market operation using T-accounts. The Public Assets Liabilities Banking System Assets Liabilities Federal Reserve System Assets Liabilities
Suppose that the Federal Reserve wants to decrease the money supply. Which of the following policies would achieve this goal? Group of answer choices Decrease the reserve requirement. Buy Treasury Bills from banks. Raise the Discount Rate. Decrease the interest rate paid on reserves held at the Fed.
1. Answer the following questions related to stabilization. 1.1) Imagine the United States educational system improves, which makes workers more productive. If the federal reserve is trying to stabilize the price level in response, they should: a. do nothing, because prices cannot be prevented from changing in the long run. b. increase the discount rate. c. Raise taxes d. sell bonds in open market operations. e. lower the reserve requirement. f. Increase government spending. g. do nothing, because prices will...
1) If the Fed wants to do easy money policy, it can a. increase reserve requirements b. buy bonds from banks c. sell bonds in the open market d. raise the discount rate 2) The Lombard method: a. is a method for the Fed loaning reserves to banks b. is described accurately by all listed options c. put the rate on federal funds above the rate on discount loans d. has not been used since 2003
Suppose the Federal Reserve is presently holding $4.2 trillion in U.S. Treasury bonds. If the Fed decides to sell $1 billion of these bonds to the public, we can expect reserves in the banking system to _____________ and we can expect the money supply to _____________. Group of answer choices increase : increase decrease : decrease increase : decrease decrease : increase
Assume that the Federal Reserve just announced that it intends to increase money supply growth. Thus, interest rates will definitely: Why is the correct answer "increase or decrease" instead of just "decrease"? Please explain with details AND NO, THE ANSWER IS NOT DECREASE, IT'S "INCREASE OR DECREASE".