Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 33, Problem 8SPPA
To determine
To explain:
The effects that could take place if the central bank does not take any
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Chapter 33 Solutions
Foundations of Economics (8th Edition)
Ch. 33 - Prob. 1SPPACh. 33 - Prob. 2SPPACh. 33 - Prob. 3SPPACh. 33 - Prob. 4SPPACh. 33 - Prob. 5SPPACh. 33 - Prob. 6SPPACh. 33 - Prob. 7SPPACh. 33 - Prob. 8SPPACh. 33 - Prob. 9SPPACh. 33 - Prob. 10SPPA
Ch. 33 - Prob. 11SPPACh. 33 - Prob. 1IAPACh. 33 - Prob. 2IAPACh. 33 - Prob. 3IAPACh. 33 - Prob. 4IAPACh. 33 - Prob. 5IAPACh. 33 - Prob. 6IAPACh. 33 - Prob. 7IAPACh. 33 - Prob. 8IAPACh. 33 - Prob. 9IAPACh. 33 - Prob. 10IAPACh. 33 - Prob. 11IAPACh. 33 - Prob. 12IAPACh. 33 - Prob. 1MCQCh. 33 - Prob. 2MCQCh. 33 - Prob. 3MCQCh. 33 - Prob. 4MCQCh. 33 - Prob. 5MCQCh. 33 - Prob. 6MCQCh. 33 - Prob. 7MCQ
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- i need help with the last question Suppose the economy is initially at long run equilibrium, when there is an unexpected increase in firm investment in the country.How does this impact the economy? (write out either "inflationary" or "recessionary" inflationary 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"lower money supplyWhat 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"sell securitiesThis action by the Fed will cause interest rates to _______. (Write out "increase" or "decrease"increaseThe 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_forwardSuppose that the Bank of Canada determines that the Canadian economy is currently overproducing. What can the Central Bank do to slow down economic activity? a. The Central bank can pursue an expansionary monetary policy by increasing the money supply, causing a decrease in the interest rate. As a result, real GDP will increase and the price level will increase. b. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing a decrease in the interest rate. As a result, real GDP will decrease and the price level will decrease c. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will decrease. d. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will increase e. The…arrow_forwardWhat is the expected impact of a decline in the money supply to the US economy? A. Higher aggregate prices (inflation) B. Lower aggregate prices (deflation) C. There is no general relationship between the money supply and inflatonarrow_forward
- Question 1 a. Increasing prices erode the purchasing power of the dollar. It is interesting to compute what goods would have cost at some point in the past after adjusting for inflation. Go to the Federal Reserve Bank of St. Louis, FRED database website at https://research.stlouisfed.org/fred2/and find the consumer price index for all urban consumers. What would a car that cost $25,000 today have cost the year 1996? b. Many countries have central banks that are responsible for their nation’s monetary policy. Go to www.bis.org/cbanks.htm and select one of the central banks (for example, ECB, Norway). Review that bank’s Web site to determine its policies regarding application of monetary policy. How does this bank’s policies compare to those of the U.S. central bank?arrow_forwardexplain if the central bank pursues targeting the interest rate, it is likely to lossse control over a monetary aggregate.arrow_forwardExpansionary monetary policy is when: None of the statements are correct. The president and congress agree to lower interest rates. The president orders the Federal Reserve to cut income taxes. The Federal Reserve reduces the regulations hindering our business community. The Federal Reserve increases the nation's money and credit supply and raises interest rates. A Moving to the next question prevents changes to this answer. JUL 21 tv 11 A O COMMUNITYarrow_forward
- d. The Federal Reserve decides to take action to reduce the inflation rate in the US. i. What open market operation should the Fed undertake? ii. Use a correctly labeled graph of the money market to show the impact of the open market operation. iii. Explain how the change in the interest rate you identified on your graph in part (d) (ii) would affect price level and real output in the US. iv. Explain the impact of the change in price level you identified in part (d) (iii) on real wages in the short run. v. Explain the impact of the change in price level you identified in part (d) (iii) on people who had previously loaned money at a fixed interest rate. e. If the open market operation you identified in part (d) (i) was equal to $6 million, what would be the maximum total change in the money supply if the required reserve ratio is 10 percent? Explain how you determined this amount.arrow_forwardMonetary policy affects the economy with a long lag, in part because A. proposals to change monetary policy must go through both the House and Senate before being sent to the president. B. changes in interest rates primarily influence investment spending, and firms make investment plans far in advance. C. monetary policy works through changes in interest rates, and the Fed does not have the ability to change interest rates quickly. D. changes in interest rates primarily influence consumption spending, and households make consumption plans far in advance.arrow_forward1. When real GDP declines during a recession, what typically happens to consumption, investment, and the unemployment rate? 2. Explain the impact of an increase in the money supply in the short run and in the long run. 3. Why is it easier for the Central Bank to deal with demand shocks than with supply shocks?arrow_forward
- The economy of Carlsberg is presently in equilibrium, but is suffering a recession as depicted in the graph below. The central bank of Carlsberg is introducing an expansionary monetary policy to get the economy back to the full-employment level of real GDP. Price index 160 140 120 100 80 80 7 2 AS AD LAS 60 370 380 390 400 410 420 Real GDP (in billions) a. What increase in aggregate demand is necessary to achieve this? EA $ billions. b. If successful, what will be the growth rate? Round your answer below to 2 decimal places. % c. If successful, what will be the inflation rate? Round your answer below to 2 decimal places. %arrow_forwardhelp me with this question Look at the imagearrow_forwardRead the event The Federal Reserve raises reserve requirements. What would likely result from this event? A. An economy would see a slight decrease in aggregate demand. B. Interest rates on loans decline. C. Consumer demand would increase thus increasing prices. D. Inflation would reach levels that are acceptable for full employment.arrow_forward
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