1. If the Federal Reserve buys $250 million worth of government securities and t
ID: 2428706 • Letter: 1
Question
1. If the Federal Reserve buys $250 million worth of government securities and the M1 multiplier is 2, bank reserves will A) fall by $250 million. B) rise by $250 million. C) fall by $500 million. D) rise by $500 million E) fall by $125 million.
2. Over time, overall responsibility for formulating monetary policy has become increasingly concentrated in the A) Federal Reserve Bank of New York. B) Council of Economic Advisors. C) Federal Deposit Insurance Corporation. D) Federal Reserve Board of Governors.
Explanation / Answer
Answer : Option B is correct, the bank reserve will rise by $250 million as fed directly buy from the bank then the bank reserve will directly go up to the value of the security sold by the fed . If the fed government securities of $250million then the bank reserve also increases by the same amount that is $250 million.
Answer: Option D is correct. Overtime , o overall responsibility for formulating monetary policy has been increasingly in concentrated in the Federal Reserve open Market Committee . It is responsible for formulation of the policy designed to provide stable prices and economic growth . Federal Reserve Board of governors are responsible for formulating stable monetary policy.
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