Monetary policy affects the economy with a long lag, in part because A. proposals to change monetary policy must go through both the House and Senate before being sent to the president. B. changes in interest rates primarily influence investment spending, and firms make investment plans far in advance. C. monetary policy works through changes in interest rates, and the Fed does not have the ability to change interest rates quickly. D. changes in interest rates primarily influence consumption spending, and households make consumption plans far in advance.

Monetary policy affects the economy with a long lag, in part because A. proposals to change monetary policy must go through both the House and Senate before being sent to the president. B. changes in interest rates primarily influence investment spending, and firms make investment plans far in advance. C. monetary policy works through changes in interest rates, and the Fed does not have the ability to change interest rates quickly. D. changes in interest rates primarily influence consumption spending, and households make consumption plans far in advance.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter14: Money And The Economy

Section: Chapter Questions

Problem 4QP

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Which of the following is true of monetary policy? a. If the Fed wants to increase the money supply, it should increase the interest rate it pays banks on their reserves. b. The long and variable lags between a shift in monetary policy and when the policy shift affects output and employment makes it easier for the Fed to time monetary policy properly. c. A monetary policy that maintains price stability provides the foundation for both economic stability and the smooth operation of a market economy. d. The Fed should try to push real interest rates to the lowest possible level in order to stimulate investment and aggregate demand.
What is a key distinction between monetary policy and fiscal policy in economic management?A. Monetary policy involves government spending and taxation, while fiscal policy focuses on interestrates and money supply.B. Monetary policy is set by the central bank, while fiscal policy is determined by the government'sbudget decisions.C. Monetary policy primarily influences employment and economic growth, while fiscal policy mainlyaffects inflation.D. Monetary policy is a short-term strategy, while fiscal policy is a long-term approach to economicmanagement.
Which of the following reduces the interest rate? a. a decrease in government expenditures and a decrease in the money supply b. an increase in government expenditures and an increase in the money supply c. an increase in government expenditures and a decrease in the money supply d. a decrease in government expenditures and an increase in the money supply
How do fiscal and monetary policies compare in terms of timing? a. Decision and implementation of monetary policy are comparatively slow, but its effects occur relatively quickly. b. Decision of fiscal policy is quick comparatively slow, but its implementation and effects occur rather slowly. c. Decision and implementation of fiscal policy are comparatively slow, but its effects occur relatively quickly. d. The decision, implementation and effects steps of monetary policy are always quicker than those of fiscal policy.
What is the advantage of monetary policy over fiscal policy? O. Monetary policy can be implemented faster than fiscal policy O. Once implemented, the effect of monetary policy can be realized faster than fiscal policy O. The monetary policy affecting Investment category, which is more flexible than the Consumption and Government expenditure category O. Monetary policy is more effective at reducing the recessionary/inflationary gap
“Monetary policy is the macroeconomic policy laid down by the central bank of an economy.”In terms of the above statement, explain how monetary policy can be used to combat inflation
Suppose that the money supply increases by 20 percent. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP? (Assume that the velocity of money is constant.) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It must increase by more than 20% It must increase by less than 20% C It stays the same d. It must increase by 20%
Which of the following is true for monetary policy? Select one: a. As a contractionary monetary policy, the Bank of Canada can increase the target for the overnight rate. b. As an expansionary monetary policy, the central bank can buy bonds from the public to reduce a inflationary gap. c. The central bank can sell bonds during an economic downturn in order to stabilize the economy. d. The central bank can use open market operations to change the target for the overnight rate.
2.Which of the following is an example of monetary policy? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a A change in taxes b A change in the money supply c A change in the interest rate d A change in the price level
classical economists a. argued that money supply determined aggregate demand b. believed that the quantity of money influences interest rates and real wages c. regarded monetary policy as unimportant since quantity of money does not determine price level. d. that prices would increase more than proportionate to an increase in money supply
1. What are lags and why are they important when designing fiscal and monetary policies? (Make sure to contrast the differences in lags between monetary and fiscal policies). 2. Is the long-term scorecard of monetary and fiscal policies in the US more of a learning curve with significant successes or an example of poor government efforts at economic stabilization?
Question 6 If the economy were represented by the following graph, what is the appropriate monetary policy? Price Level LRAS SRAS El P1 AD Real GDP Y1 Yp buy government bonds from commercial banks, thereby lowering interest rates and increasing aggregate demand. Ob sell government bonds to commercial banks, thereby lowering interest rates and increasing aggregate demand buy government bonds from commercial banks, thereby increasing interest rates and decreasing aggregate demand O d) sell government bonds to commerical banks, thereby increasing interest rates and decreasing aggregate demand.