SRPC1.LRPC-SRPC3SR99 * (%)Refer to the Figure 16-4. If the economy is at point h and the Bank ofCanada pursues a contractionary monetary policy, then the economy willmove to which point in the short and long run?aObpoint d in the short run and point c in the long runpoint b in the short run and point c in the long runOC point c in the long-run and point a in the long runOd point m in the short run and point c in the long run

Phillips curve shows a trade of between inflation and unemployment. Short run phillips curve shows a…

SRPC1 LRPC a SRPC3 SRPCZ 7 9 9 (%) Refer to the Figure 16-4. If the economy is at point h and the Bank of Canada pursues a contractionary monetary policy, then the economy will move to which point in the short and long run? Ob point d in the short run and point c in the long run point b in the short run and point c in the long run. OC. point c in the long-run and point a in the long run Od point m in the short run and point c in the long run

SRPC1 LRPC a SRPC3 SRPCZ 7 9 9 (%) Refer to the Figure 16-4. If the economy is at point h and the Bank of Canada pursues a contractionary monetary policy, then the economy will move to which point in the short and long run? Ob point d in the short run and point c in the long run point b in the short run and point c in the long run. OC. point c in the long-run and point a in the long run Od point m in the short run and point c in the long run

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 correct explain a b c Don't answer by pen paper
As the figure to the right indicates, the Fed can affect both the money supply and interest rates. However, in recent years, the Fed targets interest rates in monetary policy more often than it does the money supply. Which interest rate does the Fed target? OA. The federal funds rate OB. The long-term nominal interest rate OC. The short-term real interest rate OD. The discount rate 6- 0- 700 MS₂ MS₁ B MD 750 800 850 900 950 1,000 1,050 1,100 Quantity of Money, M (Sbillions)
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4. When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following a) a quantitative easing policy. b) a expansionary monetary policy. c) a contractionary monetary policy. d) a loose monetary policy.
Initially, the Central Bank sets the equilibrium interest rate at 7% at which money supply is equal to money demand. Suppose now nominal income starts to increase. What should the Central Bank do if it wants to maintain the interest rate constant at 7%? а. All of the answers are incorrect b. The Central Bank should increase the money supply by selling government bonds С. The Central Bank should reduce the money supply by selling government bonds d. The Central Bank should reduce the money supply by buying government bonds е. The Central Bank should increase the money supply by buying government bonds
The money stock measured as M1 is growing at the rate of 5% per year. If real GDP is growing at 2% per year, and the income velocity of circulation of money is constant, Select one: the economy will achieve noninflationary growth O b. the inflation rate will be around 1%. O c. the inflation rate will be around 5% O d. the inflation rate will be around 3%.
4. A common rule used for describing the conduct of monetary policy is the Taylor π = r + 0.5 (²-³) + 0.5(π — ñ), where r is the real rate of rule, given by i interest and it is a target rate of inflation. Assume that the real interest rate at full employment to be constant at 2%. Assume also that the same 2% represents target inflation. a. What is the nominal interest rate i when inflation and output are at their equilibrium target level? b. Suppose that the central bank observes a rate of inflation of 4%. With all other variables at the same level. What is the nominal interest rate the central bank would target according to the Taylor rule?
2. The original interest rate is at 2%. Suppose the central bank decreased the money supply. Which of the following new interest rate is possible due to the change in the level of money supply? a. 1.5% b. 1.0% C. 4.0%
The Federal Funds Rate is: A. A short-term nominal interest rate B. A short-term real interest rate C. A long-term nominal interest rate D. A long-term real interest rate
1
7. Consider the money market. Suppose the U.S. economy begins to boom and aggregate output increases. Describe the effect on the interest rate if the Federal Reserve decides to increase the money supply at the same time that aggregate output increases.
3. Describe functions of a central bank and the policy tools used by central banks to control the quantity of money