BU204_01_Bryant_Stephanie_Unit 9 Assignment
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UNIT 9 - BU204 - MACROECONOMICS
1
Unit 9 Assignment Template: Monetary Policy Name: __
Stephanie Bryant
____________
BU204 Section Number: _
01
_____ Date:
_
January 17
th
, 2023
_____________
Assignment
This assignment addresses how the Federal Reserve uses monetary policy and its monetary policy tools to try to stabilize the economy while meeting its dual mandate of controlling inflation and regulating unemployment.
This assignment assesses your knowledge on the following Course Outcome:
BU204-3:
Examine the roles of money, banking, and the Federal Reserve System, and how monetary policy is used to mitigate negative impacts on the national economy.
1. The economy of a hypothetical country has been stable for two or three years with very low unemployment. Wages have been gradually increasing during this time. Now stock market prices
begin significant increases, causing peoples’ investments, such as their retirement accounts and other investments to increase in value. People feel confident about the future. They believe they will keep their jobs, get regular pay raises and life will be good. With this positive feeling, people feel better about making purchases. They now use their new-found sense of wealth to buy
many things that they had been hesitant to purchase in the past. Given this scenario, insert your answers below each of the following questions. a. What kind of economic gap will start to occur (inflationary or recessionary)?
An inflationary gap would occur because the prices are fluctuating. b. Which of these graphs, Figure 1 or Figure 2, depicts this economic gap?
Figure 1 would depict the economic gap.
Figure 1
UNIT 9 - BU204 - MACROECONOMICS
2
Figure 1: Graph of the economy showing demand shifted to the right.
Figure 2
Figure 2: Graph of the economy showing demand shifted to the left.
c. What part of the Federal Reserve’s congressional mandate does this scenario trigger (price stability and maximum sustainable employment)?
The Federal Reserve mandate would trigger the price stability because of the varying prices. d. What kind of monetary policy might be helpful to stabilize the economy (expansionary or contractionary)?
Contractionary monetary policy is a policy that intends to reduce the rate of monetary expansion to fight inflation (Corporate Finance Institute, 2022). This type of policy would be best it will help stabilize the economy because it reduces the rate to help fight inflation. e. What specific monetary policy tools does the Federal Reserve have available to use in
this scenario? Monetary policy tools that the Federal Reserve have available to them is the ability to sell bonds and securities. Also, a rise in interest rates can help as well. f. Explain, in detail, how the Federal Reserve should use each of these tools to maximize their effect in stabilizing the economy. What will be the likely effect of each monetary tool’s use on the money supply and the resulting impact on the economy?
In an inflationary gap in the economy, the Federal Reserve should work on lowering the rise in prices due to inflation. Also, the Federal Reserve could use the open market as a tool where they would sell securities in the market. This will decrease the money supply
UNIT 9 - BU204 - MACROECONOMICS
3
and create a rise in interest rates. Because the liquidity or the money supply will decrease,
people will have less money themselves and the spending would be limited. When the interest rates are high, people and businesses are not taking out loans and they will instead be saving more. 2. The economy of a hypothetical country has been stable for two or three years with very low unemployment. Wages have been gradually increasing during this time. Now, an aggressive policy of increasing tariffs on foreign goods imported into the country results in retaliatory actions from the other countries against the country’s products and services. This causes great loss of business in the country and results in a significant portion of workers losing their jobs. Given this scenario, insert your answers below each of the following questions. a.
What kind of economic gap will start to occur (inflationary or recessionary)?
A recessionary gap would occur. This kind of economic gap is the difference between real GPD and potential GDP at full employment level (Wall Street Mojo, 2023). When the demand decreases, it would create an influx of products that have not been sold. When the demand for products lowers and the income of exporters decreases this could cause a recession. b. Which of these graphs, Figure 1 or Figure 2, depicts this economic gap?
Figure 2 would depict this type of economic gap. Figure 1
Figure 1: Graph of the economy showing demand shifted to the right.
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Related Questions
You will submit a Word document that is in proper APA formatting. Your Word document should be properly submitted with citations/references to support your work. Please answer the following questions:
Suppose you are an advisor to the Business Cycle Dating Committee. You are asked to look at macroeconomic data to evaluate whether the economy has entered a recession this year. Which data do you look at? How does the economy behave at the onset of a recession? Explain how unemployment changes over the business cycle. Why do these changes occur?
Make sure that it is 2 to 3 word pages please!
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Topic: Discuss the inflation dynamics in emerging markets between 2017 and 2022 and the implications for the conduct of monetary policy with a particular focus on South Africa.
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SECTION B: MACROECONOMICS
QUESTION 3
The mandate of the South African Reserve Bank (SARB) is to target inflation and keep it within the
band of 3% - 6%. The bank does this through adjusting the repo-rates.
Discuss three channels of the money transmission mechanism emanating from fluctuations of the
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Specific subject : Macroeconomics - Phillips Curve & Okun's Law
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TOPIC: Dynamic Model of Money
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"The dynamic model of money starts with the economy in a steady state, or long-run equilibrium."
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FIN
Lee
Dash
Mid T
Question
Not yet
answere
(a) "Hyperinflation in Venezuela is the currency instability in Venezuela that began in
2016 during the country's ongoing socioeconomic and political crisis. Venezuela began
experiencing continuous and uninterrupted inflation in 1983, with double-digit annual
inflation rates. Inflation rates became the highest in the world in 2014 under Nicolás
Maduro, and continued to increase in the following years, with inflation exceeding
1,000,000% by 2018. Economist had highlighted some potential causes of
the hyperinflation include heavy money-printing and deficit spending by Venezuela
government and offcourse, the loss of massive government revenue due to weak oil
price which 90% of its export rely on oil industry."
(Alijazeera, 2019)
(i)
potential causes of
"Economist had highlighted some
the hyperinflation include heavy money-printing and deficit spending by
Venezuela government..."
Using appropriate diagrams, explain how fiscal deficit cause…
arrow_forward
Question: In the context of monetary policy and inflation targeting, consider a scenario where a central bank adopts a contractionary monetary policy. Assuming the economy initially operates at the natural rate of unemployment and the Phillips Curve holds in the short run, which of the following outcomes is most likely? A) Short-term increase in both inflation and unemployment. B) Short-term decrease in inflation and an increase in unemployment. C) Long-term stabilization of inflation with no change in unemployment. D) Immediate increase in economic growth and reduction in inflation. Don't use chatgpt please provide valuable answer
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_forward
Background: Some years back policy makers in the Kingdom of Bahrain were faced with rising inflation caused by the fall in the value of the US dollar relative to other currencies. The Kingdom’s currency unit, the Bahraini dinar (BD), is pegged to the dollar, so when the dollar goes down in value the BD goes down as well. A weaker dollar/dinar means that anything and everything Bahrainis buy from overseas cost them more dinars. The dramatic fall in the dollar/dinar essentially made all Bahrainis poorer in terms of what their money would buy. To soften the effect of the peg the government agreed at the time to give each low-income Bahraini household (but not non-Bahraini residents, who represent 52.7% of the Kingdom’s population and 70%-plus of its workforce) BD50 (equal to $133) monthly to make it easier to buy what food and other necessities. We can’t forget, however, that inflation can be caused by putting too much money into the economy and that a rise in the general price of…
arrow_forward
Background: Some years back policy makers in the Kingdom of Bahrain were faced with rising inflation caused by the fall in the value of the US dollar relative to other currencies. The Kingdom’s currency unit, the Bahraini dinar (BD), is pegged to the dollar, so when the dollar goes down in value the BD goes down as well. A weaker dollar/dinar means that anything and everything Bahrainis buy from overseas cost them more dinars. The dramatic fall in the dollar/dinar essentially made all Bahrainis poorer in terms of what their money would buy. To soften the effect of the peg the government agreed at the time to give each low-income Bahraini household (but not non-Bahraini residents, who represent 52.7% of the Kingdom’s population and 70%-plus of its workforce) BD50 (equal to $133) monthly to make it easier to buy what food and other necessities. We can’t forget, however, that inflation can be caused by putting too much money into the economy and that a rise in the general price of…
arrow_forward
Background: Some years back policy makers in the Kingdom of Bahrain were faced with rising inflation caused by the fall in the value of the US dollar relative to other currencies. The Kingdom’s currency unit, the Bahraini dinar (BD), is pegged to the dollar, so when the dollar goes down in value the BD goes down as well. A weaker dollar/dinar means that anything and everything Bahrainis buy from overseas cost them more dinars. The dramatic fall in the dollar/dinar essentially made all Bahrainis poorer in terms of what their money would buy. To soften the effect of the peg the government agreed at the time to give each low-income Bahraini household (but not non-Bahraini residents, who represent 52.7% of the Kingdom’s population and 70%-plus of its workforce) BD50 (equal to $133) monthly to make it easier to buy what food and other necessities. We can’t forget, however, that inflation can be caused by putting too much money into the economy and that a rise in the general price of…
arrow_forward
Background: Some years back policy makers in the Kingdom of Bahrain were faced with rising inflation caused by the fall in the value of the US dollar relative to other currencies. The Kingdom’s currency unit, the Bahraini dinar (BD), is pegged to the dollar, so when the dollar goes down in value the BD goes down as well. A weaker dollar/dinar means that anything and everything Bahrainis buy from overseas cost them more dinars. The dramatic fall in the dollar/dinar essentially made all Bahrainis poorer in terms of what their money would buy. To soften the effect of the peg the government agreed at the time to give each low-income Bahraini household (but not non-Bahraini residents, who represent 52.7% of the Kingdom’s population and 70%-plus of its workforce) BD50 (equal to $133) monthly to make it easier to buy what food and other necessities. We can’t forget, however, that inflation can be caused by putting too much money into the economy and that a rise in the general price of…
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Background: Some years back policy makers in the Kingdom of Bahrain were faced with rising inflation caused by the fall in the value of the US dollar relative to other currencies. The Kingdom’s currency unit, the Bahraini dinar (BD), is pegged to the dollar, so when the dollar goes down in value the BD goes down as well. A weaker dollar/dinar means that anything and everything Bahrainis buy from overseas cost them more dinars. The dramatic fall in the dollar/dinar essentially made all Bahrainis poorer in terms of what their money would buy. To soften the effect of the peg the government agreed at the time to give each low-income Bahraini household (but not non-Bahraini residents, who represent 52.7% of the Kingdom’s population and 70%-plus of its workforce) BD50 (equal to $133) monthly to make it easier to buy what food and other necessities. We can’t forget, however, that inflation can be caused by putting too much money into the economy and that a rise in the general price of…
arrow_forward
Background: Some years back policy makers in the Kingdom of Bahrain were faced with rising inflation caused by the fall in the value of the US dollar relative to other currencies. The Kingdom’s currency unit, the Bahraini dinar (BD), is pegged to the dollar, so when the dollar goes down in value the BD goes down as well. A weaker dollar/dinar means that anything and everything Bahrainis buy from overseas cost them more dinars. The dramatic fall in the dollar/dinar essentially made all Bahrainis poorer in terms of what their money would buy. To soften the effect of the peg the government agreed at the time to give each low-income Bahraini household (but not non-Bahraini residents, who represent 52.7% of the Kingdom’s population and 70%-plus of its workforce) BD50 (equal to $133) monthly to make it easier to buy what food and other necessities. We can’t forget, however, that inflation can be caused by putting too much money into the economy and that a rise in the general price of…
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Need help with multiple choice macroeconomic question
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The central bank of Barbados decides to pursue anexpansionary monetary policy. (lower interest rate)
(i) Identify one possible action they could take. (ii) Carefully explain, in as much detail as possible, how the chosen action will impact the money market. (iii) Illustrate the overall impact of the chosen action on the money market.
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ECN 360Intermediate EconomicsCourse Information:This course focuses on microeconomic principles and techniques of analysis from the perspective of the firm and the study of the national economy. Topics include the costs of production, market structures, profit maximization, regulation and deregulation of business, labor markets, GDP and measures of economic well-being, national income accounting, the effects of business cycles, an overview of fiscal, monetary and supply side policies, and role of money, banks, and the Federal Reserves System in the United States.PrerequisitesECN 220Required Course Materials:•Schiller B. (2010), The economy today (12th ed.). McGraw-Hill. ISBN: 13:9780073375892 customized textbook using selected chapters only. •Refer to individual modules for other specific required readings and resources.•If you need help formatting assignments, go to the Writing Center in the Student Success Center, read the style guide, and use the templates for this…
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Monetary policy: Monetary policy refers to the use of interest rates and other monetary tools by the central bank to influence the economy. In the case of a severe negative supply shock, the central bank may lower interest rates to stimulate borrowing and investment, which can boost demand and offset the reduction in supply. However, this may lead to inflation if the increased demand leads to higher prices, which can further erode the purchasing power of consumers.
Explain this graphically please.
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Question 3:
A individual wants to manage its demand for monetary assets.
The options available include a bank deposit that pays 15%
interest but requires 2 hours of dedicated time at bank during
work hours to withdraw money. The total transaction need is
$10,000 and the hourly wage rate if $7 for the individual. Find
the optimal visits to the bank and average amount that is kept
at bank.
The economy is experiencing high inflation and the Governor
State Bank makes the following observations. The Growth of
Money Supply is 40%, the growth of income Y is 10% and
growth in nominal interest rate is 20%. The interest rate
elasticity is -0.1 and income elasticity is 0.5. What is the
current inflation, and what should be the new value of money
growth if Governor wants inflation to be 2%.
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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.
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Suppose the bank of Ghana purchases Ghc 180 million worth of Government of Ghana bonds to the public. ( a) With the aid of money market diagrams, explain how the money market will be affected.
(b) Explain what will happen to the interest and show why the change in the interest rate will restore the money market back to equilibrium
(c) Use the Keynesian Cross diagram to illustrate and explain how the goods market will be affected by this monetary policy.
(d) Using your answer in part (iii) above can you conclude that the above monetary policy is contractionary? Explain.
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(c) Briefly outline Keynes' view of money and compare it with that of the quantity theory of money (or Monetarists’ view).
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Subject :- Economy
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not copy paste
Q)What do you mean by monetary and fiscal policy? What are the similarities and differences between fiscal policy and monetary policy? What are the three goals of fiscal and monetary policy? Discuss what type of fiscal and monetary policy currently government of Pakistan adopted and why?
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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.
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Questıon One
Zambia has adopted an inflation targeting framework to manage its monetary policy. Using your knowledge of money and banking, elaborate on the key features of the inflation targeting framework and also bring out the positives and negative aspects of such a framework. What key gaps can you isolate that exist in the conduct of inflation targeting for Zambia?
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Continued monetary tightening
05 October 2022
The Monetary Policy Committee today increased the Official Cash Rate (OCR) to 3.5% from 3.0%. The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment. Core consumer price inflation is too high and labour resources are scarce. Global consumer price pressures remain heightened. The global demand for goods and services is exceeding supply capacity, putting upward pressure on prices. Food and energy prices are being particularly exacerbated by the war in Ukraine. A recent decline in oil prices and an easing in some supply-chain constraints have seen headline inflation measures fall in some countries. However, core measures of inflation have risen and persist. Central banks are tightening monetary conditions, implying a weaker growth outlook for New Zealand's trading partners. In New Zealand, the level of domestic spending has…
arrow_forward
Continued monetary tightening
05 October 2022
The Monetary Policy Committee today increased the Official Cash Rate (OCR) to 3.5% from 3.0%. The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment. Core consumer price inflation is too high and labour resources are scarce. Global consumer price pressures remain heightened. The global demand for goods and services is exceeding supply capacity, putting upward pressure on prices. Food and energy prices are being particularly exacerbated by the war in Ukraine. A recent decline in oil prices and an easing in some supply-chain constraints have seen headline inflation measures fall in some countries. However, core measures of inflation have risen and persist. Central banks are tightening monetary conditions, implying a weaker growth outlook for New Zealand's trading partners. In New Zealand, the level of domestic spending has…
arrow_forward
Continued monetary tightening
05 October 2022
The Monetary Policy Committee today increased the Official Cash Rate (OCR) to 3.5% from 3.0%. The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment. Core consumer price inflation is too high and labour resources are scarce. Global consumer price pressures remain heightened. The global demand for goods and services is exceeding supply capacity, putting upward pressure on prices. Food and energy prices are being particularly exacerbated by the war in Ukraine. A recent decline in oil prices and an easing in some supply-chain constraints have seen headline inflation measures fall in some countries. However, core measures of inflation have risen and persist. Central banks are tightening monetary conditions, implying a weaker growth outlook for New Zealand's trading partners. In New Zealand, the level of domestic spending has…
arrow_forward
Continued monetary tightening
05 October 2022
The Monetary Policy Committee today increased the Official Cash Rate (OCR) to 3.5% from 3.0%. The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment. Core consumer price inflation is too high and labour resources are scarce. Global consumer price pressures remain heightened. The global demand for goods and services is exceeding supply capacity, putting upward pressure on prices. Food and energy prices are being particularly exacerbated by the war in Ukraine. A recent decline in oil prices and an easing in some supply-chain constraints have seen headline inflation measures fall in some countries. However, core measures of inflation have risen and persist. Central banks are tightening monetary conditions, implying a weaker growth outlook for New Zealand's trading partners. In New Zealand, the level of domestic spending has…
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Typed answer and answer with explanation
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