Draw the MONEY demand curve and money supply curve and label the equilibrium interest rate as i*. Show how the MS-MD graph changes due to the given events and as a result show how the equilibrium interest rate changes. (Show and clearly state what happens to the MS AND MD curves and also what happens to the interest rate) 1. GDP increases and at the same time the Fed lowers the discount rate.

Table 15-4 Year 2022 2023 Potential Real GDP $18.1 trillion 18.4 trillion Real GDP $18.1 trillion 18.3 trillion Price Level Use the editor to format your answer 150 153 Refer to Table 15-4. Suppose the following table illustrates the values of real and potential GDP and the price level if the Fed does not vote to change their current policy to be more contractionary or expansionary. If the Fed wants to keep real GDP at its potential level in 2023, should the Fed use a contractionary or expansionary policy? How should it conduct open market operations to achieve its goal?

What is the tradeoff that the Fed faces in the short run?   In the short run, the Fed faces a tradeoff between ________.     A. the nominal interest rate and the real interest rate   B. monetary aggregates and credit aggregates   C. short-term interest rates and long-term interest rates   D. inflation and unemployment

Draw and label both graphs and show the economy in a recession. Use the money market graph to show how the FED closes the recessionary gap using monetary policy AD and AS Money Market Use arrows to explain the process:

Figure 1, Money Supply and Money Demand Money Supply. MS, Money Supply. MS Value of money, 1/P 1/P1 1/P2 MD Quantity of Money, M (billions of dollars) S900 S950 Ceteris paribus, if the Fed increases the money supply from MS1 to MS2, as indicated in the diagram above, it follows that, in the short run, there will be pressure on the price level, and pressure on nominal interest rates. Select one: O a. upward; upward O b. downward; upward O c. upward, downward O d. downward; downward

Rate of interest (%) 16 14 12 10 00 6. 4 2 0 40 80 B 120 160 200 Quantity of investment 144 240 280

Use the model of aggregate demand and aggregate supply to illustrate the impact of this change in the interest rate on output and the price level in the short run. Price Level K Aggregate Demand Quantity of Output The price level will fall. LRAS The demand for money will fall. Aggregate Supply The equilibrium interest rate will rise. Yes Which of the following will happen when the economy makes the transition from its short-run equilibrium to its long-run equilibrium? (Note: Do not adjust the graphs to reflect the transition to the long run.) Check all that apply. No Aggregate Demand Aggregate Supply LRAS (?) Is this analysis consistent with the proposition that the money supply has real effects in the short run but is neutral in the long run?

Show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graph. INTEREST RATE 12 10 8 2 0 0 20 Money Supply known as the Money Demand 40 60 80 MONEY (Billions of dollars) 100 120 = Money Demand Money Supply ? Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to by Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to by at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is effect. Use the purple line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (AD3) after accounting for the impact of the increase…

economic   Illustrate each of the following situations with a graph showing the IS curve and the Fed rule, and explain what happens to the equilibrium values of the interest rate and output: a. An increase in G with the money supply held constant by the fed b. A decrease in Z with no change in Government soending PLEASE SHOW GRAPH

Match the term with the correct description. fiscal policy monetary policy money multiplier discount rate open market operations Question 6 the interest rate that the Fed sets for inter-bank borrowing represents the same thing as GDP the setting of the level of government spending and taxation by government policymakers 1/(1-MPC) deposits that banks have received but have not loaned out the interest rate that the Fed charges banks for short-term loans the purchase and sale of U.S. government bonds by the Fed