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Fed and money supply

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1. Explain how each of the following changes the money supply.

a. the Fed buys bonds

b. the Fed raises the discount rate

c. the Fed raises the reserve requirement

2. During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain.

3. List and define any two of the costs of high inflation.

4. List the factors that might influence a country's exports, imports, and trade balance.

5. What is the difference between monetary policy and fiscal policy?

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  • Bsc, Madras University
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