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

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To understand which policy action matches the outcome in Panel (a), start by recalling how central banks influence the money market and bond prices through open market operations. Panel (a) typically shows an increase in the price of bonds and a fall in the quantity of bonds supplied by the central bank, indicating an expansionary stance that lowers interest rates and raises bond prices by injecting liquidity.
Option a: increasing reserve requirements would reduce banks’ capacity to lend, tightening monetary conditions. This tends to lower bond prices and raise interest rates, or at least not produce the bond-price rise depicted in Panel (a). Hence this choice conflicts with the shown expansionary effect.
Option b: raising the discount rate makes borrowing from the central bank more expensive for financial institutions, contracting credit and generally tightens monetary conditions, which would pressure bond prices down or leave them unchanged, not align with Panel (a).
Option c: selling government bonds in the open market drains reserves from the banking system, reducing liquidity and typically raising interest rates. This is a contractionary move and would not produce the bond-price increases seen in Panel (a).
Option d: buying government bonds in the open market injects reserves into the banking system, expanding liquidity, pushing down interest rates, and raising bond prices. This action matches the expansionary impulse depicted in Panel (a).
Option e: increasing interest payable on reserves would encourage banks to hold excess reserves rather than lend, potentially dampening lending and increasing short-term interest rates, which is not consistent with the bond-price rise in Panel (a).
Thus, the reasoning across the options points toward a policy that expands liquidity and lowers yields, which is achieved by the central bank purchasing government bonds in the open market. The sequence of effects from that operation aligns with the panel’s depiction of higher bond prices and a supported expansion in the economy, while the other options imply tightening or neutral shifts that would not reproduce Panel (a)’s outcome.

Academic Courses Test#3

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

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

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Academic Courses Test#3

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

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 ____.

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.

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.

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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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.