Respuesta :
Answer:
a. monetary base and money supply rise while money multiplier does not change.
b. monetary base rises, but money supply and money multiplier fall.
c. monetary base falls, money supply falls, and money multiplier does not change.
d. monetary base rises, money supply falls, and money multiplier falls.
e. monetary base rises, money supply rises, and money multiplier does not change.
Explanation:
Each of these conditions can be explained as follows:
a. The Federal Reserve buys bonds in an open-market operation
Monetary base will increase when Federal Reserve purchases bonds from the open-market, i.e. from the public, which will in turn make money supply to rise. If we assume that reserve-deposit ratio or the currency-deposit ratio do not change, the money multiplier will remain constant.
b. The Fed increases the interest rate it pays banks for holding reserves
Banks will prefer to hold reserves when the interest is increased by the Fed because that will increase their income. The increase in the reserves held by banks will make the monetary base to rise. As more reserves relative to deposits are held by banks, this will make reserve deposit ratio to rise which in turn will reduce the money multiplier. As money multiplier falls, it causes the money supply to also fall.
c. The Fed reduces its lending to banks through its Term Auction Facility
This will make the monetary base to fall which in turn will lead to fall money supply. If we assume that reserve-deposit ratio or the currency-deposit ratio do not change, the money multiplier will remain constant.
d. Rumors about a computer virus attack on ATMs increase the amount of money people hold as currency rather than demand deposits.
This will lead to a rise in the currency-deposit ratio which will result in a fall in money multiplier. Since banks do not have enough reserves to lend, the money supply will fall. The increase in the currency being held by the people will make the monetary base to rise.
e. The Fed flies a helicopter over 5th Avenue in New York City and drops newly printed $100 bills.
This will make both the monetary base and the money supply to rise. Money supply will rise further if any of the new bills is deposited in the bank. But money multiplier would reduce should people eventually hold more currency relative to deposits.
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