ECO 212 WK 4 DQ 1 DQ 2

ECO 212 WK 4 DQ 1 DQ 2 - What happens to the money supply,...

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What happens to the money supply, interest rates, and the economy in general if the Federal Reserve is a net seller of government bonds? Describe what happens to the money supply, interest rates, and the economy in general if the Federal Reserve is a net buyer of government bonds. How do these policies affect the firm or industry in which you work? If the Fed is a net seller of government bonds, the Fed trades government bonds for cash. This cash has then been removed from the money supply. All remaining dollars are worth slightly more, increasing their value, and also increasing interest rates as the Fed is less willing to lend. If the Fed is a net buyer of government bonds, the Fed trades cash for government bonds. This cash has then been added to the money supply. All remaining dollars are worth slightly less, decreasing their value, and also decreasing interest rates as the Fed is more willing to lend. The general direction of the economy is linked to interest rates. Generally, lower rates are better because businesses can more easily borrow the money they need to finance operations. However, runaway growth can lead to inflation and ultimately to
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ECO 212 WK 4 DQ 1 DQ 2 - What happens to the money supply,...

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