Federal reserve injects money into the banking system

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1. The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

2. When the Federal Reserve injects money into the banking system, it initially causes an excess _____ of money. Equilibrium in the money market is reestablished through a(n) _____ in the price level.

3. How do the nominal exchange rate and the real exchange rate differ?

4. If the exchange rate rises, foreign residents want to purchase ______ domestic goods and domestic residents want to purchase _____ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _______ in the quantity of dollars ______. (choose from fewer, more, increase, decrease, demanded, supplied)

Reference no: EM13888404

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