Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134004976
Author: Michael Parkin
Publisher: PEARSON
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Question
Chapter 14, Problem 37APA
(a)
To determine
Explain the QE3 asset purchases.
(b)
To determine
Determine how the asset purchases damage the Fed’s credibility.
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4.
July 2020, an article on reuters.com noted that: "The Fed's total balance
sheet size rose.... It was largely due to continued purchase of Treasuries and mortgage-
backed securities aimed at keeping financial market conditions easy."
(a)
Why would the Fed's buying Treasury securities and mortgage-backed
securities cause the Fed's balance sheet to rise?
4. The hypothetical information in the following table shows what the values for real GDP
and the price level will be in 2017 if the Fed does not use monetary policy.
Year
Potential GDP
Real GDP
Price level
2016
$17.7 trillion
$17.7 trillion
114
2017
18.1 trillion
17.9 trillion
116
If the Fed wants to keep real GDP at its potential level in 2017, should it use an
expansionary policy or a contractionary policy? Briefly explain your answer.
b. Suppose the Fed's policy is successful in keeping real GDP at its potential level in
2017. State whether each of the following will be higher of lower than if the Fed had
taken no action.
а.
I.
Real GDP
II.
Potential GDP
III.
The inflation rate
IV.
The Unemployment rate
c. Draw an AD and AS graph to illustrate your answer. Be sure your graph contains
LRAS , SRAS, and AD curves for 2016 and 2017, with and without monetary policy
action.
What was the actual federal funds rate set by the Fed in 2021? Was monetary policy expansionary or contractionary? Briefly explain.
Chapter 14 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
Ch. 14.1 - Prob. 1RQCh. 14.1 - Prob. 2RQCh. 14.1 - Prob. 3RQCh. 14.1 - Prob. 4RQCh. 14.2 - Prob. 1RQCh. 14.2 - Prob. 3RQCh. 14.2 - Prob. 2RQCh. 14.3 - Prob. 1RQCh. 14.3 - Prob. 2RQCh. 14.3 - Prob. 3RQ
Ch. 14.3 - Prob. 4RQCh. 14.3 - Prob. 5RQCh. 14.4 - Prob. 1RQCh. 14.4 - Prob. 2RQCh. 14.4 - Prob. 3RQCh. 14.4 - Prob. 4RQCh. 14.4 - Prob. 5RQCh. 14 - Prob. 1SPACh. 14 - Prob. 2SPACh. 14 - Prob. 3SPACh. 14 - Prob. 4SPACh. 14 - Prob. 5SPACh. 14 - Prob. 6SPACh. 14 - Prob. 7SPACh. 14 - Prob. 8SPACh. 14 - Prob. 9SPACh. 14 - Prob. 10SPACh. 14 - Prob. 11SPACh. 14 - Prob. 12SPACh. 14 - Prob. 13SPACh. 14 - Prob. 14SPACh. 14 - Prob. 15SPACh. 14 - Prob. 16APACh. 14 - Prob. 17APACh. 14 - Prob. 18APACh. 14 - Prob. 19APACh. 14 - Prob. 20APACh. 14 - Prob. 21APACh. 14 - Prob. 22APACh. 14 - Prob. 23APACh. 14 - Prob. 24APACh. 14 - Prob. 25APACh. 14 - Prob. 26APACh. 14 - Prob. 27APACh. 14 - Prob. 28APACh. 14 - Prob. 29APACh. 14 - Prob. 30APACh. 14 - Prob. 31APACh. 14 - Prob. 32APACh. 14 - Prob. 33APACh. 14 - Prob. 34APACh. 14 - Prob. 35APACh. 14 - Prob. 36APACh. 14 - Prob. 37APACh. 14 - Prob. 38APACh. 14 - Prob. 39APACh. 14 - Prob. 40APACh. 14 - Prob. 41APACh. 14 - Prob. 42APA
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- Suppose the Federal Reserve shifts to an expansionary monetary policy by buying bonds through open-market operations. This problem will work through the short-run effects of this move according to the Keynesian transmission mechanism. The following graph shows the money demand and money supply curves. As a result of the Fed's policy, the Interest rate to Adjust the following graph to show the effect of the Fed's expansionary monetary policy. 200 1500 INTEREST RATEarrow_forwardWhat is the FED's decision-making strategy regarding the assessment of state of economy? (explain about each of the three variables used by FED in a separate paragraph) What happens when the Fed lowers the federal funds rate by buying securities in an open market? Show step by step how the FED fights inflation by using your graphs. How does the FED adjust the quantity of monetary base by using open market operations?arrow_forwardAccording to John Maynard Keynes, Answer the demand for money in a country is determined entirely by that nation’s central bank. the supply of money in a country is determined by the overall wealth of the citizens of that country. the interest rate adjusts to balance the supply of, and demand for, money. the interest rate adjusts to balance the supply of, and demand for, goods and services. Question 34 While a television news reporter might state that “Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent,” a more precise account of the Fed’s action would be as follows: Answer “Today the Fed told its bond traders to conduct open-market operations in such a way that the equilibrium federal funds rate would decrease to 5.25 percent.” “Today the Fed lowered the discount rate by a quarter of a percentage point, and this action will force the federal funds rate to drop by the same amount.” “Today the Fed took steps to decrease the money supply by an amount that is…arrow_forward
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