Week 2 Money Supply

Week 2 Money Supply - Chapter 10, problem #10 (page 202)....

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Chapter 10, problem #10 (page 202). Briefly explain your answers in a post not to exceed 200 words . Respond to at least two of your classmates' postings. Do you agree or disagree with each of the following statements? Explain your answers. When the Treasury of the United States issues bonds and sells them to the public to finance the deficit, the money supply remains unchanged because every dollar of money taken in by the Treasury goes right back into circulation through government spending. This is not true when the Feds sells bonds to the public. The Fed’s holdings of government securities must decrease because the securities it sold will now be owned by someone else (Case, Fair, Oster (2009) Chapter 10, page 198). The Federal Reserve (Fed) most commonly uses overnight repurchase agreements (repos) to temporarily create money, or reverse repos to temporarily destroy money, which offset temporary changes in the level of bank reserves. The Fed also makes outright purchases and sales of securities through the System Open Market Account (SOMA) with its manager
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This note was uploaded on 07/07/2011 for the course BUSINESS 350 taught by Professor Mitchell during the Fall '09 term at Troy.

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Week 2 Money Supply - Chapter 10, problem #10 (page 202)....

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