All Questions
Tagged with money-supply bonds
10 questions
0
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2
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408
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How does the central bank reduce money supply by selling bonds if the buyer of the bonds can use bonds as currency?
When the central bank wants to reduce the money supply, it can sell bonds. That way, the money supply reduces by the amount paid for the bonds. The buyer will have bonds instead of cash. The bonds can ...
- 563
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1
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85
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Why Increase in Money Supply Reduces Interest Rate in Money Market?
I understand the fact the Increase in Money Supply reduces the interest rate in Money Market.
But these two explanations are confusing me a lot. I'm not able to understand which is correct.
Reason 1
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1
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0
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24
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Money-market model: Income rises, bond prices fall. But if income rises, saving increases — in bonds. So why does rising income lower bond prices?
According to the money market model that determines the equilibrium interest rate at which the demand for money in the economy equals the supply of money: when the money demand curve shifts right for ...
- 11
1
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1
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420
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Chain effects when Money Demand is greater than Money Supply
Here is an example graph of Money Market Equilibrium
The chain effects when interest rate is 8% are :
Excess Demand for Money => So, People would sell Bonds => Bond Prices goes Down => ...
3
votes
2
answers
261
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Can the Federal Reserve permanently decrease money supply?
As far as I understand it, the primary way the Federal Reserve decreases the money supply is by selling bonds–the entities buying these bonds give up their cash for them and thus M0 is decreased. ...
- 163
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49
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How the Fed and Treasury coordinate on liquidity management
On top of the Fed's USD120bn monthly treasury/MBS purchases, the drawdown in Treasury issuance over the last year has also added over USD1tr to the system. The premise is, faced with drawn-out debt ...
- 1,101
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2
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96
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How does the Fed's stimulus push stocks markets higher?
I read that the Fed’s stimulus last March has contributed to a spectacular rally in stock markets. And indeed S&P500 has increased a lot since March.
But how does the mechanism work? How does the ...
- 11
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votes
1
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143
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What does the Fed do with their profits?
As far as I understand the system the Fed prints money which it then uses to buy bonds. Bonds are basically statements of debt meaning that the Fed receives interest from the parties it has bought the ...
- 113
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2
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144
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Why does the Fed feel the need to reduce its balance sheet? [closed]
Why does the Fed feel the need to reduce its balance sheet?
What is the problem with the Fed having a large balance sheet long term? What would happen if the value on the Fed's balance sheet ...
- 649
0
votes
1
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48
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Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase?
Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase?
I understand that to increase the money supply, the ...
