Suppose that the government conducts expansionary fiscal policy and increases spending to 200. What will be the effect on the economy? Assuming central bank 1)hold interest rate at 0.1 and 2) allow the interest rate to change. Illustrate

What is the main tool used by central banks to influence short-term interest rates and the money supply? A. Fiscal policy B. Open market operations C. Exchange rate policy D. Price controls

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

M7