If Mary takes money from her savings account and buys a T-bond from Jody with that money, it's:
A. An expansionary fiscal policy.
B. An example of contractionary monetary policy.
C. An example of expansionary monetary policy
D. An example of neutral (neither expansionary nor contractionary) policy.
E. The same as the Fed buying bonds.
do some research, then take a shot. What do you think? Hint: be sure to think about bank reserves and reserve requirements.
To determine the answer to the question, let's break down the scenario and consider the implications for fiscal and monetary policy.
Mary taking money from her savings account and buying a T-bond from Jody means that she is using her own funds to purchase a government bond. This action does not involve the government directly spending money (fiscal policy) nor does it impact the money supply (monetary policy).
A. An expansionary fiscal policy involves the government increasing spending, cutting taxes, or both to stimulate the economy. Since Mary's action does not involve any government spending, it is not an expansionary fiscal policy.
B. Contractionary monetary policy involves the central bank reducing the money supply by selling government bonds or raising interest rates. Mary's action does not involve selling bonds, but rather buying bonds. Therefore, it is not an example of contractionary monetary policy.
C. Expansionary monetary policy involves the central bank increasing the money supply to stimulate the economy. Mary's action does not involve the central bank, so it is not an example of expansionary monetary policy.
D. An example of neutral (neither expansionary nor contractionary) policy would not have any significant impact on the economy. Since Mary's action does not involve any significant policy-related impact, it is not an example of neutral policy.
E. The statement "The same as the Fed buying bonds" refers to the central bank purchasing bonds to increase the money supply, which is an example of expansionary monetary policy. However, Mary is not the central bank, so it is not the same as the Fed buying bonds.
In conclusion, the answer is none of the provided options. Mary's action of buying a T-bond from Jody using her savings account money does not directly align with any specific fiscal or monetary policy.