17.When the Bank of Canada fights inflation,. А. a decrease in the federal funds rate decreases aggregate demand В. a decrease in bank reserves decreases the quantity of money demanded С. an open market purchase increases the overnight loans rate D. a decrease in the supply of loanable funds raises the long-term interest rate and increases investment

17.When the Bank of Canada fights inflation,. А. a decrease in the federal funds rate decreases aggregate demand В. a decrease in bank reserves decreases the quantity of money demanded С. an open market purchase increases the overnight loans rate D. a decrease in the supply of loanable funds raises the long-term interest rate and increases investment

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the Fed reduces money supply, then in the short run:a. interest rate rises but exchange rate falls.b. exchange rate rises and net exports fall.c. interest rate falls, but the level of investment does not rise.d. exchange rate falls, but net exports do not rise
Initially, the Central Bank sets the equilibrium interest rate at 7% at which money supply is equal to money demand. Suppose now nominal income starts to increase. What should the Central Bank do if it wants to maintain the interest rate constant at 7%? а. All of the answers are incorrect b. The Central Bank should increase the money supply by selling government bonds С. The Central Bank should reduce the money supply by selling government bonds d. The Central Bank should reduce the money supply by buying government bonds е. The Central Bank should increase the money supply by buying government bonds
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The federal funds market is the market where: a. the federal government raises funds to cover its budget deficit. b. the Federal Reserve System makes loans to commercial banks. c. commercial banks with excess reserves make loans to commercial banks seeking reserves. d. commercial banks make loans to the Federal Reserve.
15. Suppose money growth is 7% and output growth is 3%. What is the expected long run increase in prices predicted by the quantity equation? а. 10% b. 7% с. 4% d. 3%
2. In 2018, assume the economy was at full employment with the following economic data: Real GDP: $7 billion ● Nominal interest rate: 5 percent Price level: 1.5 . • Velocity of circulation: 7 • Required reserve ratio: 10%. a. Explain the quantity theory of money and how each side of the equation relates to Nominal GDP. b. Calculate the quantity of money in 2018. c. Assume the central bank made an open market purchase in 2019, increasing the monetary base by $10 million. What is the increase to the money supply? d. In 2019 the velocity of circulation did not change, and real GDP grew by 5%. What was the inflation rate for 2019? e. Create a graph of the money market reflecting the money supply in 2018 and money demanded in 2018. Be sure to define your equilibrium point. Demonstrate the changes to your market in 2019 assuming the money demand curve does not change and nominal interest rate is 3%. f. Create a graph for the aggregate demand and aggregate supply model in 2018 and define your…
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In an economy, the banks prefer to keep 25% of their deposits in reserve. The population likes to keep their currency holdings equal to 10% of the deposits. Initially, there was zero money in the economy. Then the central bank buys $120 worth of T-bills from a household. The household receives $120 on its checking account. 1. the commercial bank formed reserves and gave out a loan. The population allocated the lent funds between the currency in pockets and checkable accounts. Before anything else happens, how much money is there in the economy at the end of Round 1? ANSWER: 288 For question 1 How is this answer obtained?, How would you solve question 2. 2. In Round 2, more lending, borrowing, and reserve formation takes place. How much is in DEPOSITS in the economy at the end of Round 2?
6.In the New Keynesian model, a short run effect of The Fed buying bonds in the open market is a.an increase in the money supply b.a decrease in the money supply c.lower unemployment d.none of the above e.a&c
4. Policy issues .. Suppose an economy exhibits a large unexpected decrease in productivity growth that lasts for a decade; however, monetary policymakers are slow to recognize that the change is to potential not current-output and they interpret the decrease in output as a recession that leads current output to fall below potential output. In this scenario, what likely are the responses from policy makers? What is possible consequence?
8 During rapid inflation or hyperinflation: a. The real value of money falls. b. People will be more willing to hold their wealth in the form of money c. The use of money to undertake transactions will increase. d. The real value of money remains the same.
1. Which of the following would NOT cause a rise in the money supply (assume ceteris paribus)? A. An increase in government spending financed by borrowing from the central bank. B. The centFal bank imposes a reserve requirement (reserve ratio) on banks above their current ratio. C. A rise in demand for money and the central bank does not change interest rates. D. The central bank agreeing to swap toxic assets for cash (quantitative easing). E. All of the above.