Identify the open market operations for controlling the money supply.

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Chapter 4, Problem 6QQ

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Identify the open market operations for controlling the money supply.

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When conducting an open-market purchase, the Central Bank Select one: a.sells government bonds, and in so doing decreases the money supply. b.buys government bonds, and in so doing decreases the money supply. c.sells government bonds, and in so doing increases the money supply. d.buys government bonds, and in so doing increases the money supply.

Assume that the reserve requirement is 20 percent. Also assume that banks do nothold excess reserves and there is no cash held by the public. The Fed decides that itwants to expand the money supply by $40 million.a. If the Fed is using open-market operations, will it buy or sell bonds?b. What quantity of bonds does the Fed need to buy or sell to accomplish the goal?Explain your reasoning

24. If the economy is at potential output, and the Fed increases the money supply, in the short run, the likely result will be a(n) _____ in investment and a(n) _____ in consumer spending. increase; decrease decrease; increase increase; increase decrease; decrease 26. Suppose that a typical basket of goods is now less expensive than it used to be. All else equal, we would expect: the demand curve for money to shift outward. a downward movement along a fixed money demand curve. the demand curve for money to shift inward. an upward movement along a fixed money demand curve.