8. Using policy to stabilize the economyThe government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as towhether the government should attempt to stabilize the economy.Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply.The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates.Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses.The current tax system acts as an automatic stabilizer.Businesses make investment plans many months in advance.Which of the following are examples of automatic stabilizers? Check all that apply.O Personal income taxesUnemployment insurance benefitsCorporate income taxes

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Answered: 8. Using policy to stabilize the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the Federal Reserve ("the Fed") shifts to a contractionary monetary policy by selling bonds through open-market operations. Assume that this policy is unanticipated. This problem will work through the short-run effects of this move. The following graph shows the money demand and money supply curves. Show the effect of the Fed's contractionary monetary policy by shifting one or both of the curves, and ignore any potential feedback effects. As a result of the Fed's policy, the interest rate to INTEREST RATE (Percent) 15 24 0 0 300 600 Money Supply 900 Money Demand 1200 1500 1800 QUANTITY OF MONEY (Billions of dollars) Money Demand -0- Money Supply The following graph shows the demand for investment. Show the short-run effect of the Fed's contractionary monetary policy by shifting the curve or moving the point along the curve. Again, ignore any potential feedback effects. Be sure the new interest rate corresponds to the interest rate you have on the top graph. INTEREST RATE…
Read 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.
1. If LRAS = $500 billion, RGDP = $700 billion, and MPC = .8, then what should the Fed do? Be specific and list all three options. Also draw and label both the current situation and what would occur as the government impacted the economy through their actions. 2. What are the impacts in the short run of the above actions on the following: the market interest rate, the quantity of money demanded, investment spending, aggregate demand, potential output, the price level, and equilibrium RGDP.
X 8. Using policy to stabilize the economy The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. Businesses make investment plans many months in advance. Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. The current tax system acts as an automatic stabilizer. Which of the following are examples of automatic stabilizers? Check all that apply. Unemployment insurance benefits Corporate income taxes The discount rate C O 1:24 PM 4/29/2022
4.This is a two-part assignment using the links below plus additional resources. Using the below links interpret the monetary and fiscal policies as either expansionary or contractionary. Define which school of thought supports each of the polices. Make sure to cite at least three sources either in MLA or APA style and have a minimum of 250 words. Here are some sources to get started https://www.whitehouse.gov/issues/budget-spending/ (Links to an external site.) https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
Economics If the Fed wants to move from a point on the short-run Phillips curve representing high unemployment and low inflation to a point representing lower unemployment and higher inflation, then it should A.use contractionary monetary policy. B.use expansionary fiscal policy. C.use expansionary monetary policy. D.use a combination of expansionary monetary and fiscal policies.
1. If the domestic currency depreciates,a) using a graph of aggregate demand and supply EXPLAIN how monetary policymakers would respond (if at all) to stabilize economic activity. Assume the economy starts at a long-run equilibrium. b) using a graph of aggregate demand and supply EXPLAIN how lags in this policy process (mentioned in (a)) can result in undesirable fluctuations in output and inflation. EXPLAIN EVERYTHING IN DETAIL PLEASE
Question 9: If the central bank buys government securities from the private sector-money markets, other things being equal, what would the effect be on the following? (a) The economy's monetary base Click or tap here to enter text. (b) Short-term money market interest rates Click or tap here to enter text. (c) Aggregate demand, economic activity and inflation Click or tap here to enter text.
In response to the Great Recession, the Federal Reserve had to take drastic and largely untested measures to stabilize both the financial system and macroeconomy. These measures caused the monetary base to increase from approximately $850 billion to over $4 trillion. Indicate whether each school of macroeconomic thought—classical, Keynesian, monetarist, real business cycle, and secular stagnationist—would support the Fed’s actions.
Year 2022 2023 Potential Real GDP $18.1 trillion 18.4 trillion Real GDP $18.1 trillion 18.6 trillion Price Level 150 155 Refer to Table 15-6. Suppose the table above illustrates the values of real and potential GDP and the price level if the Fed does not vote to change their current policy to be more contractionary or expansionary. If the Fed wants to keep real GDP at its potential level in 2023, should the Fed use a contractionary or expansionary policy? Should it raise or lower its interest rate target? How should it conduct open market operations to achieve its goal?
Which of the following describes the chain of events the Central bank uses to fight recession? A. Raise the monetary policy rate target, sell government securities, decrease reserves and loans, increase aggregate demand.B. Raise the monetary policy rate target, buy government securities, increase reserves and loans, decrease aggregate demand.C. Lower the monetary policy rate target, buy government securities, decrease reserves and loans, decrease aggregate demand.D. Lower the monetary policy rate target, buy government securities, increase reserves and loans, increase aggregate demand.
1) Suppose that inflation is currently 7% and inflationary expectations are also 7%. Assume that intermediate goods prices are not contributing to increased costs. If the Fed wishes to reduce inflation, it must set interest rates to A. raise investment B. create an expansionary output gap C. make actual output equal to potential output D. create a recessionary output gap E. raise consumption

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