(Q#8a) Each time the FED now sells a large tranche (amount) of treasury and mortgage bonds, what impact will this have on the money market directly after the supply of money has decreased – in the immediate "run"? [a] a surplus will be created in the money market [b] a shortage will be created in the money market [Q#8b] As a result of the outcome from the previous question, what was true in the money market? [a] the prevailing interest will be too high and an equilibrium balance will be restored by a reduction in the interest rate through time [b] the prevailing interest will too low and an equilibrium balance will be restored by an increase in the interest rate through time
(Q#8a) Each time the FED now sells a large tranche (amount) of treasury and mortgage bonds, what impact will this have on the money market directly after the supply of money has decreased – in the immediate "run"? [a] a surplus will be created in the money market [b] a shortage will be created in the money market [Q#8b] As a result of the outcome from the previous question, what was true in the money market? [a] the prevailing interest will be too high and an equilibrium balance will be restored by a reduction in the interest rate through time [b] the prevailing interest will too low and an equilibrium balance will be restored by an increase in the interest rate through time
Chapter20: Monetary Policy
Section: Chapter Questions
Problem 4SQP
Related questions
Question
The FED has recently decided to reverse the massive buildup of its holding of
Treasury and mortgage bonds. Thus, they began to sell these Treasury
securities in the financial markets to remove liquidity from them and reduce
the supply of money and credit in the economy. This will create a shortage in
the
![(Q# 8a) Each time the FED now sells a large tranche (amount)
of treasury
and mortgage bonds, what impact will this have on the money
market
directly after the supply of money has decreased – in the
immediate "run"?
[a] a surplus will be created in the money market
[b] a shortage will be created in the money market
[Q#8b] As a result of the outcome from the previous question,
what was
true in the money market?
[a] the prevailing interest will be too high and an equilibrium
balance will
be restored by a reduction in the interest rate through
time
[b] the prevailing interest will too low and an equilibrium
balance will be
restored by an increase in the interest rate through time](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5ce4e4ae-1699-499c-9753-5954c1f79830%2Fc96a49da-63ce-4374-b971-aea6e42342ab%2Fiyue01h_processed.png&w=3840&q=75)
Transcribed Image Text:(Q# 8a) Each time the FED now sells a large tranche (amount)
of treasury
and mortgage bonds, what impact will this have on the money
market
directly after the supply of money has decreased – in the
immediate "run"?
[a] a surplus will be created in the money market
[b] a shortage will be created in the money market
[Q#8b] As a result of the outcome from the previous question,
what was
true in the money market?
[a] the prevailing interest will be too high and an equilibrium
balance will
be restored by a reduction in the interest rate through
time
[b] the prevailing interest will too low and an equilibrium
balance will be
restored by an increase in the interest rate through time
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