21) If the money multiplier is determined to have a value of 3 and the Fed wants

Question

21) If the money multiplier is determined to have a value of 3 and the Fed wants to increase the money supply by $6 billion, then it must cause the monetary base to by increase... $6 billion O decrease...$2 billion increase...$18 billion increase...$2 billion decrease. .?$18 billion 22) According to the Instructor's Chapter Comments, the authors of the textbook are incorrect about the Fed's conventional tools of monetary poligy. According to the instructor, which of the following should not be included as a tool of monetary policy? discount policy (the combination of the discount rate and the deposit rate) open-market operations O reserve requirements the target federal funds rate 23) The range within which the federal funds rate can fluctuate is determined by a ceiling of the and a floor of the deposit rate... discount rate deposit rate . . . target federal funds rate target federal funds rate... deposit rate discount rate...target federal funds rate discount rate. ..deposit rate O

Explanation / Answer

Answer:

Increase in money supply = money multiplier * increase in the monetary base

6 = 3 * b

b = 2

So, option increase by 2 billion this is the correct option.

If you have any doubt then please let me know.

Thanks!

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