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Economics
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29 Nov 2019

Why is NOT a good idea for Federal Government to spend money, without paying for it in tax revenues and for the Federal Reserve to increase the money supply in the economy by creating and issuing more money?

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Nestor Rutherford
Nestor RutherfordLv2
17 Dec 2019
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Related questions

Which action can the federal reserve take to pursue a tight-money policy?

a. raise tax rates on all taxpayers to increase revenues

b. decrease the amount of money in the economy

c. regulate trading between banks and customers

d. prevent the government from running a deficit

e. increase the amount of money in the economy

Which of the following would not increase the supply of money in a fiat money economy?

a. The Federal Reserve sells gold.

b. The Federal Reserve decides to sell existing Treasury securities.

c. The Federal Reserve increases the required reserve ratio.

d. The Federal Reserve increases the discount rate.

e. Fewer deposits are made in banks.

Say the Federal Reserve wanted to increase the money supply inorder to lower interest rates in order to stimulate the economy sothat unemployment will be reduced. What are the negative effects ofthis situation?

Isn't it true that when interest rates are low people are morelikely to hold onto there money which results in banks having alarger reserve? So even if the money supply increases if people areless likely to spend money it won't increase economic growth.

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