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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Explain whether each of the following events increases or decreases the money supply.

a. The Fed buys bonds in open-market operations.

b. The Fed reduces the reserve requirement.

c. The Fed increases the interest rate it pays on reserves.

d. Citibank repays a loan it had previously taken from the Fed.

e. After a rash of pickpocketing, people decide to hold less currency.

f. Fearful of bank runs, bankers decide to hold more excess reserves.

g. The FOMC increases its target for the federal funds rate.

Subpart (a):

To determine

The events that increases or decreases the money supply in the economy.

Explanation

Money is anything which is accepted as payment to the goods and services from a market. It acts as a medium of exchange, store of value, unit of account, and so forth. Any commodity that is being accepted by the economy for this purpose is considered as money. It is usually metal coins and paper currencies.

The purchase of government bonds from public generates new currency in the economy...

Subpart (b):

To determine

The events that increases or decreases the money supply in the economy.

Subpart (c):

To determine

The events that increases or decreases the money supply in the economy.

Subpart (d):

To determine

The events that increases or decreases the money supply in the economy.

Subpart (e):

To determine

The events that increases or decreases the money supply in the economy.

Subpart (f):

To determine

The events that increases or decreases the money supply in the economy.

Subpart (g):

To determine

The events that increases or decreases the money supply in the economy.

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