Suppose most of your savings are in bonds and, according to an article in the Wall Street Journal, the Fed announces that it will carry out a contractionary monetary policy. What should you do? Should you continue to hold your bonds or should you move your funds into bank accounts?

Q: What problems will the federal reserve face if people are unemployed and facing inflation?

A: Inflation is defined as the rise in the average price level of commodities and services in the…

Q: what is the benefit if the commercial banks create new money?

A: Money refers to the economic unit that is used to make exchanges and to set the value of any…

Q: Who benefits when the Bank of Canada lowers interest rates? Who benefits when interest rates rise?…

A: Firms ( who are borrowing ) and consumers benefit when the Bank of Canada lowers interest rates.…

Q: How important is the Central Bank in the financial market?

A: The economies around the world work with the help of various institutions, may it be domestic…

Q: why should monetary policy be used ?

A: All central banks have three tools of monetary policy in common. First, all of them use open market…

Q: How many banks failures occurred in the United States during 2021?

A: A bank failure occurs when a bank becomes insolvent. Under such circumstances, the bank is unable to…

Q: Let's say that you have put $1,000 in your savings account at a local financial institution, and an…

A: 1.The employee is correct, of course.The reason for this is that the money you have deposited in…

Q: Each worker gets equal pay. Fill in Average Product and Marginal Product.  At what input level will…

A: Average product is the output produced by each unit of worker and marginal product is the additional…

Q: Without compounding and exponential growth rates, the value of money today would be the value of…

A: In economics, people make an exchange of goods and services to get something in return. Sometimes,…

Q: The financial system must ensure the availability of efficient credit facilities to allow greater…

A: Credit Facilities: Credit facilities are loans that businesses take to run their operations. A…

Q: How does the Federal rate affect mortgage rates?

A: A mortgage is simply a house loan and a mortgage rate is the interest rate on such a loan. Through…

Q: Let’s pretend the economy is in a horrible recession, inflation is rising, and interest rates are…

A: In a hypothetical scenario where the economy is experiencing a severe recession, rising inflation,…

Q: Would it be advantageous to borrow money if you expected prices to rise?  Would you want a…

A: Inflation is change in the overall price level of the economy. Generally, interest rates for loans,…

Q: The Fed must know how much money people want to hold so that it can supply the appropriate amount?

A: The Federal Reserve System that is also known as the Fed is the United States' central bank and…

Q: As a lender/depositor, how would you compare time to demand deposits?     Demand deposits are more…

A: Meaning of Demand Deposit: The term demand deposits refer to the situation under which an…

Q: Select economic problem occuring from an increase in the money supply and explain what happens.

A: Money:Money refers to anything which can be accepted in exchange of commodity or in repayment of…

Q: The demand for money increases when the interest rate increases. Is it true or false?

A: Demand refers to the various quantities of goods that consumers are willing to buy at different…

Q: Is an economy both social and a financial system?

A: An economic system, also known as an economic order, is a method of producing, allocating resources,…

Q: How does the Central Bank affects the interest rate?

A: Money Supply: It is the total quantity of money in the economy at a point in time. Money supply and…

Q: The Fed is very concerned about the stability of financial markets. When individuals and firms are…

A: Introduction: Financial markets, in general, refer to any marketplace where securities are traded,…

Q: does the Fed regulate money to influence the interest rates?

A: Federal Reserve is the central bank of United States. It is the apex bank and the regulator of…

Q: Critics of federal banking policy argue that deposit insurance is a key reason for banking failures.…

A: When depositors are given confidence about their money, in case a bank fails, it is "deposit…

Q: The Fed buys $1 million in bonds from a bond dealer. The bond dealer deposits the money in a bank…

A: Step 1: Answer: The bank can lend out $850,000 after receiving the deposit of $1 million from the…

Q: List the three tools that the Federal Reserve could use to enact Monetary Policy.

A: Federal Reserve: It is central bank of the United States

Q: Write two to three paragraphs explaining how J. P. Morgan helped the U.S. economy. Your response…

A: Morgan had deep and extremely beneficial connections with the London financial world as a result of…

Q: Economics Suppose that a large bank borrowed $1 billion from the Federal Reserve for one week. How…

A: The monetary base can be defined as the amount of money that is in circulation in an economy in a…

Q: What is a balance sheet? What is net worth?

A: Balance sheet and net worth are part of financial analysis and accounting.

Q: Explain how does monetary policy affect the economy and business activities?

A: The monetary policy is the central bank's policy of money supply where central bank influences the…

Q: what is a centeral bank

A: A central bank is an institution which is given authority of controlling over all the financial…

Q: Donovan would like to build a game room in his basement but does not want to take a loan. He opens…

A: Future Value  is based on an assumed rate or growth in value of an investment or asset over…

Q: There was a temporary increase in the price of oil. Why does an increase in price of oil pose a…

A: FED faces a trade-off i.e. dilemma of either lowering the inflation rate or increasing real GDP. FED…

Q: During the early months of the pandemic, the inflation rate fell well below the 2% target which…

A: Inflation refers to an increase in the general price level in an economy over the time. Inflation…

Q: Let's pretend the economy is in a horrible recession, inflation is rising, and interest rates are…

A: A recession is a period in which the output level is below the potential level of output and the…

Q: How do changes in interest rates impact the lending behavior of financial institutions?

A: Interest rates represent the cost of borrowing or the return on savings. They play a crucial role in…

Q: What are the tools the reserve bank is using in Australia to run a monetary policy?

A: There are four primary tools for the central bank of any country to have control in the money…

Q: How monetary works in a period of recession?

A: Monetary policy is used by the government or a central bank of the country to change the economy's…

Q: Explain the bond markets in the real world.

A: A bond is an advance that the bond buyer, or bondholder, makes to the bond backer. Governments,…

Q: Which of these is most likely an effect of a decrease in the prime lending rate by the Federal…

A: Answer- 2. The rate of inflation will increase.