3e) In response to part (d), the Federal Reserve
[ Select ]
buys
sells
issues
bonds and
[ Select ]
increases
decreases
doesn't change
the supply of reserves in the banking system.

Question

3e) In response to part (d), the Federal Reserve 
[ Select ]
buys
sells
issues
 bonds and 
[ Select ]
increases
decreases
doesn't change
 the supply of reserves in the banking system.

BlackTom AI · Accepted Answer

The question asks about how the Federal Reserve responds to part (d) in terms of bond operations and the effect on reserves.

First dropdown: choosing among buys, sells, or issues bonds. When the Fed buys bonds, it pays for them by crediting banks’ reserves, which increases the amount of reserves in the banking system. If the Fed instead sold bonds, reserves would fall, and if it issued bonds, that option is not typical Fed Open Market Operation terminology. Therefore, 'buys' correctly describes the Fed’s action that adds reserves.

Second dropdown: choosing among increases, decreases, or doesn’t change the supply of reserves. As explained above, asset purchases (buying bonds) inject reserves into the banking system, so the supply of reserves increases. Conversely, selling bonds would decrease reserves, and not changing reserves would be incorrect given the stated action. Therefore, 'increases' correctly describes the effect on reserve supply.

Now evaluating the alternative pairings: 
- 'buys' with 'decreases' would be inconsistent because purchases raise reserves, not reduce them. 
- 'buys' with 'doesn’t change' would be incorrect since purchases do change the level of reserves. 
- 'sells' with 'increases' would be wrong because sales reduce, not increase, reserves. 
- 'sells' with 'decreases' would be correct for a sale, but that pairing does not match the given scenario where the action is a purchase.

Putting it together, the only internally consistent pair for the Fed’s action in this context is 'buys' and 'increases', which aligns with the standard mechanics of open market purchases increasing reserves.

2025Fall-ECN3615-01 Practice Final Exam

3e) In response to part (d), the Federal Reserve [ Select ] buys sells issues bonds and [ Select ] increases decreases doesn't change the supply of reserves in the banking system.

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If the Federal Reserve wants to lower the federal funds rate, it will ____.

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2025Fall-ECN3615-01 Practice Final Exam

3e) In response to part (d), the Federal Reserve [ Select ] buys sells issues bonds and [ Select ] increases decreases doesn't change the supply of reserves in the banking system.

查看解析

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类似问题

If the Federal Reserve wants to lower the federal funds rate, it will ____.

If the central bank wants to achieve the results shown in Panel (a), it should

An open market sale by the Federal Reserve ______ the monetary base and ______ the size of the Fed's balance sheet.

3e) In response to part (d), the Federal Reserve buys bonds and increases the supply of reserves in the banking system.

An open market sale by the Federal Reserve ______ the monetary base and ______ the size of the Fed's balance sheet.

The Federal Reserves usually implements its open market operations by buying and selling

The Federal Reserve Trading Desk at the New York Fed implements the FOMC policy directive by buying or selling Blank ______ on the over the counter market.

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考试浏览器助手

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An open market sale by the Federal Reserve the monetary base and the size of the Fed's balance sheet.

An open market sale by the Federal Reserve the monetary base and the size of the Fed's balance sheet.