C) the recognition lagA) lower the federal funds rate, thereby increasing the supply of loanable funds, and lowering the exchange rate.B) raise the federal funds rate and shift the aggregate demand curve leftward.16) In the short run, monetary policy canaise the federal funds rate, thereby decreasing the supply of loanable funds, raising the real interest rate, anddecreasing investment.D) All of the above answers are correct.

Monetary policy is the policy of the central-bank which aims at achieving economic goals with the…

16) In the short run, monetary policy can A) lower the federal funds rate, thereby increasing the supply of loanable funds, and lowering the exchange rate. B) raise the federal funds rate and shift the aggregate demand curve leftward. raise the federal funds rate, thereby decreasing the supply of loanable funds, raising the real interest rate, and decreasing investment. D) All of the above answers are correct.

16) In the short run, monetary policy can A) lower the federal funds rate, thereby increasing the supply of loanable funds, and lowering the exchange rate. B) raise the federal funds rate and shift the aggregate demand curve leftward. raise the federal funds rate, thereby decreasing the supply of loanable funds, raising the real interest rate, and decreasing investment. D) All of the above answers are correct.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

To fight the economic slowdown from the Covid-19 pandemic, the Bank of Canada decides to expand the money supply. a) Using diagrams, carefully explain whether or not this policy would be effective under a fixed value for the exchange rate? b) What is the effect of this policy on the interest rate in the long run? Explain your answer.
In a large open economy, the IS curve has been given by Sd(r)-Id(r)=NX(e), where e is the real exchange rate that is positively related to the real interest rate r. Can you illustrate why the IS curve is downward sloping? That is, as Y increases, the real interest rate r is lower in equilibrium.
What would happen if Russian Central Bank increases interest rate by %17 to %19 to real exchange rate and expected real interest rate? (Notice that Russian inflation rate is %16)
If the central bank raises interest rates it will A) lower aggregate demand and raise the exchange rate. B) raise aggregate demand and lower the exchange rate. C) lower aggregate demand and lower the exchange rate. D) raise aggregate demand and raise the exchange rate.
Explain why permanent monetary expansion has a larger effect on output than temporary monetary expansion in case of a floating exchange rate regime in the short run.
Can you answer this question, please? Someone said that the correct answer is B, but I think it is answer B. Can you help me, please? 50) Which of the following policies could a government or central bank pursue to prevent the exchange rate from depreciating? A) Raise interest rates B) Increase the money supply through open-market operations C) Raise taxes D) Buy foreign currencies on the foreign exchange market
The exchange rate between the United States dollar and the Japanese yen is determined in a flexible foreign exchange market. A. Assume that Japan is currently in a recession. What fiscal policy action could the Japanese government take to eliminate the recession? B. What would be the effect of the fiscal policy action identified in Part A on interest rates in Japan? C. Draw a correctly labeled graph of the foreign exchange market for the United States dollar. Show on your graph the impact of the change in interest rates identified in Part B on each of the following: i. The supply of United States dollars i. The equilibrium exchange rate of the United States dollar D. What would be the effect of the change in the exchange rate identified in Part Cil on United States imports? E. What would be the effect of the change in United States exports identified in Part D on United States unemployment?
Explain these statements a) “In a flexible exchange rate system with perfect capital mobility, expansionary fiscal policy will always crowd out net exports.”d) “A central bank may not be able to successfully stabilize the economy since monetary policy has long and variable outside lags. But if the central bank knew the exact length of the outside lag, active monetary stabilization policy would always be successful.
Explain how changes in exchange rates impact the economy through the aggregate demand- aggregate supply (AD/AS) model. Explain how fluctuations in exchange rates can influence loans and banks.
The South African Reserve Bank (SARB) seeks to maintain liquidity in the money market using a variety of monetary instruments. The exchange rate is crucial for the Reserve Bank to achieve its dual mandate of price stability. Write a brief essay discussing the importance of the exchange rate in maintaining price stability.
Use the money market and foreign exchange (FX) diagrams to answer the following questions. This question considers the relationship between the euro (€) and the U.S. dollar ($). The exchange rate is in U.S. dollars per euro, E$/€. Suppose that with financial innovation in the United States, real money demand in the United States decreases. On all graphs, label the initial equilibrium point A. A. Assume this change in U.S. real money demand is temporary. Using the FX and money market diagrams, illustrate how this change affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C. B. Assume this change in U.S. real money demand is permanent. Using a new diagram, illustrate how this change affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C.
The nominal money supply is growing by 5 percent annually in the United States and 10 percent annually in Kenya, while real GDP is rising by 2.5 percent annually in the United States and 5.5 percent annually in Kenya. Using the simple monetary model of exchange-rate determination, please estimate the percentage change, if any, needed in the dollar-shilling (Ksh) exchange rate for it to reach a long-run equilibrium (assuming that the currencies were in equilibrium at the outset). Be sure to include the relevant equation in your answer, and indicate whether the dollar will appreciate, depreciate, or hold its value versus the shilling. (Hint: the percentage is a round number.) Please use the uncovered interest parity approximation to answer the following question: (a) If the return on euro deposits (i€) is 1%, the expected dollar-euro exchange rate (Ee$/€) is 1.30, and dollar-euro spot rate (E$/€) falls to 1.25, what is the new equilibrium return on dollar deposits (i$)? (Hint 1:…