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Explain Two Ways by Which the Federal Reserve System Can

question 36

Essay

Explain two ways by which the Federal Reserve System can increase the monetary base. Why is the effect of Federal Reserve actions on bank reserves less exact than the effect on the monetary base?


Definitions:

Type II Error

A statistical error that occurs when one fails to reject a false null hypothesis, also known as a false negative.

Difference-In-Difference

An estimator that identifies the causal effect of a treatment, like a special promotion, by comparing the periods before and after the treatment between an experimental group and a control group. The second difference is designed to remove selection bias.

Price Change

A fluctuation in the market value of goods or services.

Lost Profits

The amount of money a business fails to earn due to disruptions, such as contractual breaches, acts of negligence, or other causes.

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