The Fed\'s $2.2 trillion fire hose The Fed threw a lot of money at the financial

Question

The Fed's $2.2 trillion fire hose The Fed threw a lot of money at the financial crisis in 2008 to untreeze credit markets and encourage economic nearly double its pre-crisis total. Before the crisis, the Fed held mainly worth $300 billion seant es, which it used to control the quantity of money in the economy Now government securities make up just 35% of the Fed's balance sheet. 9, 2009 O A decreases, banks make more bank loans O B. increases; bark reserves increase O D. roeases; bank reserves decrease O A becomes equal to the real interest rate O C. does not change Q Search or enter website name

Explanation / Answer

Ans:

1) Option B

increases; bank reserves increase.

2) Option D

Falls

If the Fed purchases government securities this increases money supply because bank reserves increase.A larger money supply lowers market interest rates and a smaller money supply rises market interest rates.Hence due to increase in money supply nominal interest rate falls.

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