1) For each of the following actions or changes, decide whether, ceteris paribus
ID: 2440468 • Letter: 1
Question
1) For each of the following actions or changes, decide whether, ceteris paribus, there would be an(6pts) increase, a decrease, or no change in the monetary base The Kansas City Fed spends $500 million building a new bank building. The Fed raises the required reserve ratio. The Fed sells $10 billion worth of Treasury Bimis from its portfolio. The Fed buys "toxic mortgages" from banks that are currently in trouble You withdraw $1000 in currency from your checking account and hold it as cash. The Treasury gets $200 billion in tax payments and deposits the checks in its account at the Fed Select One decrease decrease increase increase no change no change Select One Select OneExplanation / Answer
Kansas city Fed spends $ 500 million building a new bank building:
Spending increases liquid cash with people, thus monetary base will increase.
The Fed Raises the required reserve ratio:
it will reduce money availability for lending purpose. thus, monetary base will decrease.
Fed selles $ 10 billion worth of treasury bills from its portfolio.
it will mop up money from public, thereby it will reduce monetary base.
Fed buy taxi mortgage from bank that currently in trouble.
Since it was not liquid form, hence monetary base will not change.
You withdraw $ 1000 in currency from your checking account and hold it as cash.
since both of these part liquid form of money, thus there will not be any change in monetary base.
Treasury gets $ 200 billion in tax payments and deposits the checks in its account at the Fed:
it will reduce monetary base since money in liquid from is being transferred from public to government.
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