Suppose an increase in interest rates causes rising unemployment and falling output. To counter this, the Federal Reserve would a. increase government spending. b. decrease the money supply. c. decrease government spending. d. increase the money supply
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increase government spending.
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| b. |
decrease the money supply.
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| c. |
decrease government spending.
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| d. |
increase the money supply.
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- Suppose that the Bank of Canada determines that the Canadian economy is currently overproducing. What can the Central Bank do to slow down economic activity? a. The Central bank can pursue an expansionary monetary policy by increasing the money supply, causing a decrease in the interest rate. As a result, real GDP will increase and the price level will increase. b. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing a decrease in the interest rate. As a result, real GDP will decrease and the price level will decrease c. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will decrease. d. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will increase e. The…The Fed wants to decrease the money supply when the economy is booming and inflationary pressures ________ in the economy.Which of the following will result when the Federal Reserve increases the reserve requirement? A. Banks will make fewer loans and the money supply will decrease. B. Banks will make fewer loans and the money supply will increase. C. Banks will make more loans and the money supply will increase. D. Banks will make more loans and the money supply will decrease.
- Which of the following lists two things that both increase the money supply? a. The Fed buys bonds and raises the discount rate b. The Fed buys bonds and lowers the discount rate c. The Fed sells bonds and raises the discount rateA problem that the Fed faces when it attempts to control the money supply is that the Fed can only control excess reserves but not total reserves. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount. the Fed does not control the amount of money that households choose to hold as deposits in banks.Economics urgent!! This country is witnessing a recession. The Chief economist in the government of this country decides that in order to increase the rate of economic growth of the country they need to increase the money injected into the economy. Graph the implications of this money increase on: a. The money demand and money supply in the short, and b. The money market in the long-run, and c. The inflation rate. Label your axes and explain your answers.
- After the Federal Reserve buys bonds, the interest rate changes and aggregate expenditures change, the following will most likely occur a the price level in the economy will fall and money demand will decrease b the price level in the economy will rise and the money demand will decrease c the price level in the economy will fall and money demand will increase d the price level in the economy will rise and the money demand will increaseExplain the relationship between the effectiveness of monetary policy and the interest elasticity of money demand. Will the monetary policy be more or less effective the higher the interest elasticity of money demand? Explain.Assume that an economy is experiencing an economic contraction and the government decides to reduce taxes and increase government spending to stimulate the economy. By the way, Central Bank keeps money supply constant. i) Evaluate the effect of this policy on the a) Interest Rate , b)Money Demand (in the SHORT-RUN.) Explain and show your answer on the graph. ii)Evaluate the effect of this policy on output and price Level (in the LONG-RUN.) Explain and show your answer on the graph. Note : In figures, please label the axis and show the changes on the graphs using arrows.
- Suppose the reserve requirement for the United States is 8%. Instructions: Round your answers to the nearest whole number. a. Suppose the Federal Reserve wants to increase the money supply. What should it do to accomplish this goal? The Fed could make an [(Click to select) of $50 billion, resulting in a total increase in the money supply of $[ b. Now suppose the Fed wants to decrease the money supply. What should it do to accomplish this goal? The Fed could make an (Click to select) of $40 billion, resulting in a total decrease in the money supply of $ billion. billion.Policymakers aim at increasing output Y, but keeping the interest rate, i, constant. Which of the following policy mix can achieve this target?All of the answers here are incorrect.A combination of increasing G and increasing the money supply.A combination of increasing G and maintaining the money supply unchanged.A combination of decreasing G and decreasing the money supply.A combination of increasing G and decreasing the money supply.When the Fed targets the amount of money in the economy, interest rates become more variable. True False
