Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 31, Problem 11SPA
To determine
Identify the actions that Fed might take to stimulate business investments.
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Students have asked these similar questions
The Fed is very concerned about the stability of financial markets. When individuals and firms are concerned about how markets are operating, you will find that spending could slow down.
Explain how the Fed can provide stability to markets and how does the Fed impact your daily decisions.
Use the Front Page to answer three questions.
FRONT PAGE
Fed Raises Key Interest Rate
Washington D.C.-The Fed, as expected, raised the target rate on federal funds
from 2.25 to 2.5 percent today. Fed chair Jay Powell said the economy appeared
"healthy" and "solid" enough to accommodate a small increase in interest rates.
The Fed's goal is to keep inflation under control as the economy continues to
grow and unemployment falls to historic levels.
President Trump reacted immediately to the Fed action, calling it "foolish" and
"crazy" - an impediment to stronger growth and still more jobs.
Source: News reports of December 19-20, 2018.
Instructions: Round your response to two decimal places.
a. What was the Fed's target for the fed funds rate in late December 2018?
%
b. This was (Click to select) from the previous period.
c. This rate change would (Click to select) aggregate demand.
The Federal Reserve helps determine interest rates for the entire economy. Answer the following questions below.
How does the Fed stimulate the economy?
How does the Fed affect interest rates?
Does the Fed have complete control over U.S. interest rates? That is, can it set rates at any level it chooses? Why or why not?
Do you think that the Fed should control interest rates or let the free market set the rates? What are the pros and cons of having the Fed or free-market determine interest rates?
Chapter 31 Solutions
Macroeconomics
Ch. 31.1 - Prob. 1RQCh. 31.1 - Prob. 2RQCh. 31.1 - Prob. 3RQCh. 31.1 - Prob. 4RQCh. 31.2 - Prob. 1RQCh. 31.2 - Prob. 2RQCh. 31.2 - Prob. 3RQCh. 31.3 - Prob. 1RQCh. 31.3 - Prob. 2RQCh. 31.3 - Prob. 3RQ
Ch. 31.3 - Prob. 4RQCh. 31.4 - Prob. 1RQCh. 31.4 - Prob. 2RQCh. 31.4 - Prob. 3RQCh. 31.4 - Prob. 4RQCh. 31.4 - Prob. 5RQCh. 31 - Prob. 1SPACh. 31 - Prob. 2SPACh. 31 - Prob. 3SPACh. 31 - Prob. 4SPACh. 31 - Prob. 5SPACh. 31 - Prob. 6SPACh. 31 - Prob. 7SPACh. 31 - Prob. 8SPACh. 31 - Prob. 9SPACh. 31 - Prob. 10SPACh. 31 - Prob. 11SPACh. 31 - Prob. 12SPACh. 31 - Prob. 13SPACh. 31 - Prob. 14SPACh. 31 - Prob. 15SPACh. 31 - Prob. 16APACh. 31 - Prob. 17APACh. 31 - Prob. 18APACh. 31 - Prob. 19APACh. 31 - Prob. 20APACh. 31 - Prob. 21APACh. 31 - Prob. 22APACh. 31 - Prob. 23APACh. 31 - Prob. 24APACh. 31 - Prob. 25APACh. 31 - Prob. 26APACh. 31 - Prob. 27APACh. 31 - Prob. 28APACh. 31 - Prob. 29APACh. 31 - Prob. 30APACh. 31 - Prob. 31APACh. 31 - Prob. 32APACh. 31 - Prob. 33APACh. 31 - Prob. 34APACh. 31 - Prob. 35APACh. 31 - Prob. 36APACh. 31 - Prob. 37APACh. 31 - Prob. 38APACh. 31 - Prob. 39APACh. 31 - Prob. 40APACh. 31 - Prob. 41APA
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- Suppose that the Federal Reserve wants to reduce the money supply. Explain the three main policy instruments the Fed could use to reduce the money supply. In each case, detail how these policy actions are supposed to work, including the role of the private banks.arrow_forwardWhen the United States economy goes through a period of extended growth, the economy is said to be heating up! Unemployment is low and companies are increasing workers’ wages above the national minimum wage. The Federal Reserve (FED) is concerned that these wage increases will result in inflation; higher prices throughout the economy. What can the FED do?arrow_forwardHow does government or Fed recover the economy in the short run. Please use figures and words to illustrate your explanation.arrow_forward
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- The 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_forwardIf the Fed is buying bonds, then it wants bond prices to _____ and the federal funds rate to _____.arrow_forwardThe financial crisis of 2007-09 resulted in immediate action by the Fed to cut interest rates. Two or three months later some economic commentators complained that the Federal Reserve’s policies had obviously failed to turn the economy around because things were still getting worse. Was this a fair complaint against the Fed?arrow_forward
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