Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 14, Problem 8QP
To determine
The change in real GDP.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Why can’t the Fed target both the money supply and the interest rate at the same time?
A problem that the Fed faces when it attempts to control the money supply is that
the Fed can only control excess reserves but not total reserves.
the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.
the Fed does not control the amount of money that households choose to hold as deposits in banks.
If the Federal Reserve wants to keep aggregate demand (i.e. spending growth) stable, what will it do to the growth rate of money supply when a lot of good news comes out about the economy increase it, decrease it, or leave it unchanged? Explain your answer.
Chapter 14 Solutions
Macroeconomics
Ch. 14.1 - Prob. 1STCh. 14.1 - Prob. 2STCh. 14.1 - Prob. 3STCh. 14.2 - Prob. 1STCh. 14.2 - Prob. 2STCh. 14.3 - Prob. 1STCh. 14.3 - Prob. 2STCh. 14.3 - Prob. 3STCh. 14.4 - Prob. 1STCh. 14.4 - Prob. 2ST
Ch. 14.4 - Prob. 3STCh. 14 - Prob. 1QPCh. 14 - Prob. 2QPCh. 14 - Prob. 3QPCh. 14 - Prob. 4QPCh. 14 - Prob. 5QPCh. 14 - Prob. 6QPCh. 14 - Prob. 7QPCh. 14 - Prob. 8QPCh. 14 - Prob. 9QPCh. 14 - Prob. 10QPCh. 14 - Prob. 11QPCh. 14 - Prob. 12QPCh. 14 - Prob. 13QPCh. 14 - Prob. 14QPCh. 14 - Prob. 15QPCh. 14 - Prob. 16QPCh. 14 - Prob. 17QPCh. 14 - Prob. 18QPCh. 14 - Prob. 19QPCh. 14 - Prob. 1WNGCh. 14 - Prob. 2WNGCh. 14 - Prob. 3WNGCh. 14 - Prob. 4WNGCh. 14 - Prob. 5WNGCh. 14 - Prob. 6WNGCh. 14 - Prob. 7WNGCh. 14 - Prob. 8WNG
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- During times of rising inflation, the Fed will undertake monetary policy or "tight money policy."arrow_forwardSuppose the economy is initially at long run equilibrium, when there is an unexpected decrease in oil prices in the country.How does this impact the economy? (write out either "inflationary" or "recessionary" In response to this what monetary policy would the Fed employ? (write one of the following: "raise taxes", "lower taxes", "raise money supply", or "lower money supply"What is the most likely way the Fed will accomplish this change in the monetary policy? (write one of the following: "buy securities", "sell securities", "raise discount rate", "lower discount rate", or "legislation"This action by the Fed will cause interest rates to _______. (Write out "increase" or "decrease"The end result of the monetary policy is a shift of which curve in which direction. (Write out one of the following: "AD right", "AD left" "AS left", "AS right"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_forward
- The Federal Reserve manages the amount of money in circulation by buying or selling U.S. Treasury securities, usually Treasury bills. The increase or decrease of money in circulation helps the Fed to control inflation or deflation. This has an effect on your disposable income. Research the Federal Reserve system and money supply, then answer the following questions. Under what conditions would the Fed choose to decrease the money supply, how would it do so, and what is the goal of doing so? How does the Fed factor inflation into its actions?arrow_forwardHello, I would like help with this assignment. I sent the other day and the number one and two were solved, and I was told to send the rest. Thank you Monetary Policy If the economy is at full employment level of output where Y=Y*, demonstrate the state of the economy graphically and explain. If the monetary authority anticipates that growth will increase in the next 6-12 months, assume the Federal Reserve was correct, and Aggregate Demand increases. Demonstrate this on your graph, label this part b. What policy should they implement? What choices or options do they have to implement this policy? Demonstrate and explain the effects of this policy and explain fully. If the US government thought the economy was in a recessionary state, how would this policy response impact the monetary policy from part b and c. Explain fully.arrow_forwardThe economy is in an expansion, risking inflation. Which of the following lists contains things policymakers could do to try to slow the expansion? increase the money supply, decrease taxes, increase government spending decrease the money supply, increase taxes, decrease government spending increase the money supply, increase taxes, increase government spending increase the money supply, increase taxes, decrease government spendingarrow_forward
- An increase in the money supply will shift aggregate demand to the left. TRUE OR FALSE?arrow_forwardA news headline reads, "Time for change: let free market forces determine the money supply." Which statement offers a valid claim in direct support of this headline? Congress affects the economy through fiscal policy; controlling the money supply is unnecessary. Congress should lose its role in fiscal policy; it often fails to influence the money supply. The Fed is just as important as Congress, as monetary policy works differently in the economy. The Fed should be controlled by Congress, and monetary policy should be publicly voted upon.arrow_forwardAfter 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…arrow_forward
- Why can’t the Fed automatically maintain full employment and low inflation?arrow_forwardWhen the Fed targets the amount of money in the economy, interest rates become more variable. True Falsearrow_forwardSuppose the U.S. economy is initially at long run equilibrium, when there is an unexpected large decrease in government spending in the country.How does this impact the U.S. economy? (write out either "inflationary" or "recessionary" In response to this what monetary policy would the Fed employ? (write one of the following: "raise taxes", "lower taxes", "raise money supply", or "lower money supply"What is the most likely way the Fed will accomplish this change in the monetary policy? (write one of the following: "buy securities", "sell securities", "raise discount rate", "lower discount rate", or "legislation"This action by the Fed will cause interest rates to _______. (Write out "increase" or "decrease"The end result of the monetary policy is a shift of which curve in which direction. (Write out one of the following: "AD right", "AD left" "AS left", "AS right"arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning