According to the Keynesian model, if the Fed wanted to reduce inflationary pressures, which of the following combinations of policies should it pursue?   Group of answer choices   increase the reserve requirement, increase the discount rate, and sell government securities   increase the reserve requirement, increase the discount rate, and buy government securities   increase the reserve requirement, decrease the discount rate, and sell government securities   decrease the reserve requirement, decrease the discount rate, and buy government securities

If the Federal Reserve tries to target inflation near 2%, the inflation rate is 3%, and output is 3% below potential GDP, then the target federal funds rate according to the Taylor rule is: Group of answer choices 3%. 4%. 5%. 6%.

A monetary policy that reduces the amount of money and loans in the economy is a contractionary monetary policy or a “tight” monetary policy. A monetary policy that expands the quantity of money and loans is known as an expansionary monetary policy or a “loose” monetary policy. Tight or contractionary monetary policy that leads to higher interest rates and a reduced quantity of loanable funds will reduce two components of aggregate demand. Conversely, a loose or expansionary monetary policy that leads to lower interest rates and a higher quantity of loanable funds will tend to increase business investment and consumer borrowing for big-ticket items. If loose monetary policy seeking to end a recession goes too far, it may push aggregate demand so far to the right that it triggers inflation. If tight monetary policy seeking to reduce inflation goes too far, it may push aggregate demand so far to the left that a recession begins.   Note:- Do not provide handwritten solution. Maintain…

In the AS/AD model, higher interest rates are produced by: Multiple Choice O O O O a steady-as-you-go monetary policy. a contractionary monetary policy. an expansionary monetary policy. an activist monetary policy.

The Tools available when using fiscal policy are Interest Rates The Federal Reserve Open Market Operations Taxing policy and the required reserve None of the above

"Animal spirits"—optimism about and predictions for the current and future state of markets—can fuel increased spending on things like homes and financial instruments, even when those "spirits" are not based on concrete information. If the Federal Reserve or other government entities feel that increased spending on real estate isn't merited by actual economic conditions and is leading to an asset price bubble, in your opinion, should they intervene? It depends on how certain the government is that a price bubble exists or will exist. No. The government should not tell people how to spend their money. It depends. If the information is exclusive to the government, it should share it. But if the information is publicly available, the government should stay hands-off. Yes. The government has an obligation to step in whenever it can assist with things like price bubbles.

Following the Great Recession, the Federal Reserve adopted a restrictive reserve policy.   true  false

Which of the following statements is true? Group of answer choices To increase the interest rate, the Reserve Bank conducts expansionary open market operations. The central bank should reduce the price of bonds for a contractionary monetary policy. Reducing the supply of money will lead to a decrease in the interest rate. An increase in money demand leads to a fall in the interest rate.

During a period of inflation, an appropriate pair of policies for the Fed to implement would be to Group of answer choices raise the legal reserve requirement and lower the discount rate sell government securities and raise the discount rate increase the federal funds rate by purchasing government securities raise the discount rate and lower the legal reserve requirement

Explain how lowering the reserve requirement ratio by the central bank will affect the aggregate demand at any given price level. Use relevant graphs to support your answer.