Refer to the diagram above.  The shift of the aggregate demand curve from AD1 to AD2 might result from the Fed:     A)  selling bonds in the open market.   B)  increasing the discount rate.   C)  increasing the reserve ratio.   D)  buying bonds in the open market

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.

As a response to high inflation, in March 2022, the Federal Reserve System (Fed) approved its first interest rate hike since December 2018. However, inflation rate still remained very high and piked in June 2022. The last time inflation ran that high was in the 1980s. To bring down inflation, the Fed implemented more restrictive monetary policy and approved another interest rate hike of 0.75 percent in November 2022. The Fed decided to maintain the federal funds rate at a target level of 4%. What the Fed need do to achieve a higher target federal funds rate (how to implement monetary policy)? If CPI increased from 287.7 in the 2nd quarter (Q2) 2022 to 298.1 in the 3rd (Q3) 2022. Using CPI-based inflation rate, how much is real interest rate if the Fed sets nominal interest rate at 4%. Note: we assume velocity of money supply is constant.

Boblandia produces no oil. It starts at potential GDP with inflation equal to the Central Bank's inflation target. Boblandia then sees a significant increase in the price of oil. Which of the following is true (according to our models) if the Central Bank engages in inflation targeting? The Central Bank will enact expansionary monetary policy. This action will put upward pressure on read GDP. The Central Bank will enact expansionary monetary policy. This action will put downward pressure on read GDP. The Central Bank will enact contractionary monetary policy. This action will put upward pressure on read GDP. The Central Bank will enact contractionary monetary policy. This action will put downward pressure on read GDP.

What does the Taylor rule imply that policymakers should do to the fed funds rate under the following scenarios? Unemployment rises due to a recession. An oil price shock causes the inflation rate to rise by 1% and output to fall by 1%. The economy experiences prolonged increases in productivity growth while actual output growth is unchanged. Potential output declines while actual output remains unchanged. The Fed revises its (implicit) inflation target downward. The equilibrium real fed funds rate decreases.

Assume the monetary policy curve is given by r = 1.5 +0.75π. a) Calculate the real interest rate when the inflation rate is at 2%, 3%, and 4%. b) Plot the monetary policy curve and identify the points from part (a).

Suppose that the money demand function is (M/P)d = 1,000 − 100r, where r is the interest rate in percent. The money supply M is 1,000 and the price level P is 2.   If the Fed wishes to raise the interest rate to 7 percent, what money supply should it set?

Suppose the Federal Reserve (the US central bank) increases the money stock. Create a graph that explains the effect of the Fed's expansionary monetary policy in the Short Run.