Author Question: During a period of inflation, the Fed is likely to: a. sell government securities to banks in order ... (Read 51 times)

Pineapplelove6 · **on:** Jun 30, 2018

During a period of inflation, the Fed is likely to:
a. sell government securities to banks in order to reduce the amount of loanable funds.
b. buy government securities from banks in order to reduce the amount of loanable funds.
c. raise taxes in order to reduce the money supply.
d. cut the required reserve ratio in order to reduce the amount of excess reserves banks have to loan out.
e. cut the discount rate in order to increase the affordability of loanable funds.

Question 2

If the Fed buys 10 million dollars in government securities, and the required reserve ratio is 20 percent, the banking system is able to expand the money supply by:
a. 10 million.
b. 8 million.
c. 2 million.
d. 40 million.
e. 50 million.