6. a) If US money supply in the beginning of the year is $1148 billion. Suppose the Fed Bank has decided to raise the reserve ration from 10 percent to 11 percent. How it would affect the money supply? b) If tax multiplier is -2, what is the government spending multiplier? c) In order to increase equilibrium income, either the government can increase government spending or may go for tax cut? What would you suggest and why?

6. a) If US money supply in the beginning of the year is $1148 billion. Suppose the Fed Bank has decided to raise the reserve ration from 10 percent to 11 percent. How it would affect the money supply? b) If tax multiplier is -2, what is the government spending multiplier? c) In order to increase equilibrium income, either the government can increase government spending or may go for tax cut? What would you suggest and why?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, And Sources Of Business Cycles

Section: Chapter Questions

Problem 11E

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