Assume the economy is in a recession. The Federal Reserve (the Fed) would be exp

Question

Assume the economy is in a recession. The Federal Reserve (the Fed) would be expected to respond by engaging in___________monetary policy. In order to do so, the Fed will_________________U.S. government securities via open market operations. As a result, bond yields will________________The banking system’s level of reserves will___________________And, the fed funds rate of interest will ______________________

CHOICES= Contractionary, Expansionary, Buy, Sell, Increase, Decrease.
Assume the economy is in a recession. The Federal Reserve (the Fed) would be expected to respond by engaging in___________monetary policy. In order to do so, the Fed will_________________U.S. government securities via open market operations. As a result, bond yields will________________The banking system’s level of reserves will___________________And, the fed funds rate of interest will ______________________

CHOICES= Contractionary, Expansionary, Buy, Sell, Increase, Decrease.
Assume the economy is in a recession. The Federal Reserve (the Fed) would be expected to respond by engaging in___________monetary policy. In order to do so, the Fed will_________________U.S. government securities via open market operations. As a result, bond yields will________________The banking system’s level of reserves will___________________And, the fed funds rate of interest will ______________________

CHOICES= Contractionary, Expansionary, Buy, Sell, Increase, Decrease.

Explanation / Answer

1. Expansionary

Expansionary policy increases the money supply.

2. buy

When Fed buy government securities then there will be increase in the money supply.

3. increase

Increase in money supply decreases interest rate on deposits and increases the bond prices.

4. increase

When Fed buy securities from banks then reserves of banks will increase

5. decrease

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