8 Which of the Following Will Decrease the Money Supply

If it wants to reduce the amount of money in the economy it can increase the reserve requirement. Raising the reserve requirement ratio c.

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Which of the following lists two things that both decrease the money supply.

. A a leftward shift in the IS curve. If supply increases shift to the right interest rate has to decrease otherwise people would not be willing to get and hold that additional money. B Reducing indirect taxes and increasing direct taxes on higher income levels to maintain the same revenue.

Interest rate ensures that demand for money supply of money. When the Fed sells bonds the supply curve of bonds shifts to the right and the price of bonds falls. I Increase in Supply Shift to the Right.

An increase in the money supply must cause which of the following. The money supply is the total amount of money currencydeposit money present in an economy at a particular point in time. To see the effects of foreign exchange intervention on the money supply consider the following example.

If the Fed decreases the. Which of the following both decrease the money supply. Raising the reserve requirement ratio d.

Lower the discount rate and raise the reserve requirement ratio. Lowering the reserve requirement ratio. Business Economics QA Library Which of the following actions by the Fed would reduce the money supply.

Correct option is D Fall in repo rate means bank get loans for less interest from RBI then banks give loans to there customersas this will increase buying capacity of people since banks will give loan to all liberal people. The fall in the interest rate would decrease investment spending. Central banks use several methods called monetary policy to increase or decrease the amount of money in the economy.

A decrease in the discount. The Fed can try to decrease the money supply by a raising the discount rate. An increase in the interest rate paid on reserves d.

C Increasing welfare payments and leaving taxation unchanged. A 500000 open. To decrease the interest rate the Federal Reserve could.

In a liquidity trap a lower liquidity ratio may not increase the money supply because banks dont want to lend and firms dont want to borrow. Asked Mar 30 2017 in Economics by Stephanie. Up to 256 cash back B The money supply is decreasing because the Fed hoardsmoney C The money supply is increasing because the Fed makes open-marketpurchases D The money supply is decreasing because the Fed makes open-marketsales E There is no change in the money supply because the Fed cannotinfluence the money supply 11.

They are assets to the bank. A decrease in the money supply which increases interest rates d. The record of the total money supply is kept by the Central Bank of the country.

Steel automobiles and building materials can all cost more. So there are two possible changes in supply. You have supply of money by central bank and then you have demand for money by people.

A reduction in banks reserve requirements c. The fall in the interest rate would increase investment spending b. A decrease in the discount rate on Fed lending.

This means that banks have less money to lend out and will thus be pickier about issuing loans. Higher interest rates lead to a shift in the aggregate demand curve to the left. Reserves to buy government bonds from the public.

If the public buys anything from the government they will reduce their deposits in banks. In this sense foreign exchange intervention taking the form of a sale of foreign reserves has an effect on the money supply that is identical to an open market sale of government securities. 9A bank will list the mortgage loans it makes as liabilities.

In both cases the money supply is reduced. 8 O 5 INF LATION RATE Percent 1 0 0 3 6 9 15 18 12 UNEMPLOYMENT RATE Percent in the inflation rate and in the unemployment rate In the long run the decrease in the money supply. An increase in money supply can also have negative effects on the economy.

D Increasing government spending and reducing taxation by equal amounts. 8If a bank has liabilities of 3 million and a net worth of 1 million its assets will be 2 million. A decrease in the discount rate and a decrease in the interest rate on reserves b.

Lowering the reserve requirement ratio b. D no change in the interest rate if investment is. An increase in the discount rate and a decrease in the interest rate on reserves c.

Which list contains only actions that decrease the money supply. Raise the discount rate and raise the reserve requirement ratio. An open-market purchase of govenrment bonds b.

Change in supply includes an increase or decrease in supply. The money supply increases by more than 10000 as in the previous question. So a 20 reserve ratio multiplied a 500000 deposit five times into a 25 million money supply.

With the complex global economy this can ripple out and affect other nations. B lowering the discount rate. Which of the following would reduce the money supply.

Chartered banks loan out excess. It causes the value of the dollar to decrease making foreign goods more expensive and domestic goods cheaper. There will be no expansion in the money supply.

D raising the money supply. The money supply will decrease by 10000. Decrease shift to the left in supply.

The standard measures to define money usually include currency in circulation and demand deposits. Reserves Chartered banks sell government bonds to the public. C an increase in investment and a rightward shift in the IS curve.

Now suppose that the reserve ratio was set by the Fed at 10 instead of 20. Chartered banks use excess. C lowering the reserve requirement ratio.

A Reducing state retirement pensions and leaving taxation unchanged. Increase shift to the right in supply. It may be due to the change in the price of related goods income taste and preference of consumers etc.

Which of the following would reduce the money supply. On the following graph shift the curve or drag the blue point along the curve or do both to show the long-run effects of the decrease in the money supply. B a reduction in the interest rate and ambiguous effects on investment.

The Fed can increase the money supply by lowering the reserve. Raise the discount rate and lower the reserve requirement ratio. The bond sales lead to a reduction in the money supply causing the money supply curve to shift to the left and raising the equilibrium interest rate.

For the following questions use the diagram below.

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