MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 7DQ
To determine
To explain: The effects of budget deficit on the aggregate
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
If people worry about the United States defaulting on the national debt, what would you expect to happen to interest rates on U.S. Treasury securities? Why?
After a series of measures to remedy the mortgage crisis that has beset the US economy, Ben Bernanke, chairman of the Board of Governors of the Federal Reserve and his colleagues are once again looking at cutting the central bank’s key interest rate as they hope that lowering the interest rates will give the economy a boost by encouraging investors and consumers to borrow and spend (Associated Press, n. pag.). The Fed is looking at slashing the interest rate by a full percent however, many economist believe that this is not the appropriate remedy for economic conundrum (Gavin, n. pag).
According to many analysts, the issue of the economy regarding the mortgage is the lack of confidence by both the lender and the borrower. Even as the Fed resorts to drastic interest cuts, the first time the central bank has cut a full percentage point in one shot since 1982, this provides little help if lenders are not loaning money out of fear they will not be repaid and the borrowers…
14) During a period when economic growth is very strong and inflation rates are rising to uncomfortable levels, Federal Reserve policymakers might decide to pursue which type of monetary policy?
15) Which of the following pairs of terms is used to describe fluctuations in the economy?
16)
During a contractionary phase of the business cycle which of the following most likely occurs?
17) Which of the following regulations prevent price gouging?
18) what does fiscal policy include?
Knowledge Booster
Similar questions
- Predict how possible changes in monetary and/or fiscal policy may impact the supply and demand of the iPhone.arrow_forwardHave recent inflationary pressures in the U.S. made the dollar stronger or weaker relative to other currencies? How might this impact the willingness of other countries to invest in American debt?arrow_forwardIf government spending were increased, what would occur to interest ratesarrow_forward
- In what ways does the Fed utilize their monetary policy tools to affect or counter-balance fiscal policy?arrow_forwardThe central bank decided to raise interest rates when it wanted to reduce aggregate demand to fight inflation. How does an increase in interest rates reduce aggregate demand?arrow_forwardExplain how government borrowing affect interest rate in the market. What impact such change in interest rate could have on the economy?arrow_forward
- Why would a central bank be concerned about persistent,long-term budget deficits?arrow_forwardAssume that the prevailing interest rate in this economy is 6%. If the central bank decides to reduce the interest rate to 4% then: (a) This is contractionary monetary policy action and the price of exports would increase; (b) This is expansionary monetary policy and exports would increase; (c) This is expansionary fiscal policy and imports will increase; (d) This is contractionary monetary policy and imports will decrease.arrow_forwardThe financial system in Jamaica has been the subject of much attention since the news broke of the alleged fraud at Stocks and Securities Limited (SSL). The governor of the Bank of Jamaica (BOJ) has been fielding calls from concerned investors, international financial institutions, and even other regional regulators concerning the impact of this situation and the negative media reporting would have on the stability of the financial system in Jamaica and the Caribbean region.The governor would like to preserve confidence in the financial markets and institutions and has decided to embark on a series of educational “road-shows” where he will address targeted stakeholders such as the American Chamber of Commerce (AMCHAM), investor groups and the media.In this regard, the governor has assigned your team of senior professionals employed at the Bank of Jamaica to prepare a presentation slide deck for his address. Give an overview of the structure of the Jamaica financial systemThe role of…arrow_forward
- Imagine you're sitting around talking with your relatives during some family R&R. You hear members of your family discussing how "out of control" federal government spending has become as reflected in ballooning federal government budget deficits and the skyrocketing national debt. You also hear several family members express grave concern over the United States' huge trade deficit. Having just learned something about modern monetary theory (MMT), you jump into the conversation and explain that obsessing over federal government budget deficits and the U.S. trade deficit is, from a MMT perspective, misguided. Your family members are puzzled by vour remark and ask you to explain this MMT perspective. What would you say?arrow_forwardTargeting the federal funds rate ( is, is not ) as important a tool today as it was before the 2007-2009 financial crisis. During the financial crisis when the federal funds rate was near zero, the Fed ( did, did not ) wish to go lower than zero and came up with alternatives to influence interest rates and lending: the administered rates. Today, the Fed still sets a target for the federal funds rate but finds it more effective to change the administered rates. By doing that, the Fed can stimulate or restrict lending. The federal funds rate is the Feds policy rate and (is, is not ) useful when providing forward guidance. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardThe former chairman of the Federal Reserve, Alan Greenspan, used the term "irrational exuberance" in 1996 to describe the high levels of optimism among stock market investors at the time. Stock market indexes such as the S&P Composite Price Index were at an all-time high. Some commentators believed that the Fed should intervene to slow the expansion of the economy. Why would central banks want to clamp down when the economy is growing?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Macroeconomics: Principles and Policy (MindTap Co...EconomicsISBN:9781305280601Author:William J. Baumol, Alan S. BlinderPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Macroeconomics: Principles and Policy (MindTap Co...
Economics
ISBN:9781305280601
Author:William J. Baumol, Alan S. Blinder
Publisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning