3) Imagine the effects of a decline in the value of financial assets, such as stocks, on consumptionand the economy. Which of the following would not offset these effects?decreasing taxesincreasing the money supplyincreasing governmentspendingundertaking no policy action

The decline in the value of financial assets means that there will be a wealth effect on consumers.…

Answered: 3) Imagine the effects of a decline in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please answer the both questions I will give you Upvote 1) Why is a financial crisis likely to lead to a contraction in economic activity? a. None of the above are correct. b. Those that borrow funds to finance productive investment opportunities will have a greater opportunity to obtain financing. c. A disruption in the financial system diminishes the flow of funds from savers to borrowers. d. Disruptions in the financial system decreases asymmetric information, thereby decreasing the associated problems of adverse selection and moral hazard. 2) Suppose the Federal Reserve is selling $10 million of bonds to First National Bank. What is the impact on reserves and the monetary base? a. Reserves fall by $4 million and the Monetary Base falls by $4 million. b. Reserves rise by $2 million and the Monetary Base rises by $2 million. c. Reserves fall by $2 million and the Monetary Base rises by $2 million. d. Reserves fall by $2 million and the Monetary Base falls by $2 million.
Interest Rate% 12% 10% 8% 6% 4% 2% 0 5 10 15 20 25 30 35 40 45 50 Supply of Savings Select one: a. The economic dips into a recession and firms see profits fall b. Firms become more optimistic about their expected profits c. An increase in business taxes d. A decrease in household wealth Quantity of loanable funds (billions) Refer to the graph above. Which of the following would cause interest rates to increase? Ti Demand for Borrowing
#3. What is importance of financial markets for the productive capacity of the economy.?
The presence of a well developed financial market and a wide array of financial instruments is beneficial to the overall economy since the flow of funds would be greater. * True or False?
For the next two questions, please consider the following information: A closed economy with total income of $24,000 has a government that spends $2000 ($400 of which is on a Welfare-type program) and households that spend $4000 on goods and services. If total taxes are $5000, calculate private savings for this economy. Enter only numbers, a decimal point, and/or a negative sign in your answer. Round your final answer to two decimal places as necessary. Again, please consider the information from the previous question: A closed economy with total income of $24,000 has a government that spends $2000 ($400 of which is on a Welfare-type program) and households that spend $4000 on goods and services. Total taxes are $5000. Calculate this economy's economic investment. Enter only numbers, a decimal point, and/or a negative sign in your answer. Round your final answer to two decimal places as necessary.
Economic investment refers to ________. Question 4 options: A) postponing purchases of goods and services. B) selling a financial asset for a gain. C) buying a financial asset for a gain. D) making new additions to a firm's stock of capital.
5. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) INTEREST RATE (Percent) Supply Demand LOANABLE FUNDS (Billions of dollars) Demand Supply (?) Scenario 1: Individual Retirement Accounts (IRAS) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is a decrease in the maximum contribution, from $5,000 to $3,000 per year.
4 In the economy there is a decrease in profitable business opportunities for firms. As a result, in the bond market the _____ curve for bonds should shift and the new equilibrium price will be _____. demand; higher demand; lower supply; higher supply; lower
5

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3) Imagine the effects of a decline in the value of financial assets, such as stocks, on consumption and the economy. Which of the following would not offset these effects? decreasing taxes increasing the money supply increasing government spending undertaking no policy action