For the following six questions, assume the following characteristics of the monetary transmission mechanism: The money multiplier is 3.15 Interest rates will change by 1.5% for every $80 billion change in the money supply. Investment will change by $150 billion for every 2% change in the interest rate. Income will change by $7.8 billion for every $5.5 billion change in investment. 4. What is the change in income when the Fed sells $12 billion in bonds? 5. What is the change in income when the Fed sells $28 billion in bonds? 6. If the Fed wants to change income by +$245.0 billion, what must be the change in bonds bought (+) or sold (-) in the market?

For the following six questions, assume the following characteristics of the monetary transmission mechanism: The money multiplier is 3.15 Interest rates will change by 1.5% for every $80 billion change in the money supply. Investment will change by $150 billion for every 2% change in the interest rate. Income will change by $7.8 billion for every $5.5 billion change in investment. 4. What is the change in income when the Fed sells $12 billion in bonds? 5. What is the change in income when the Fed sells $28 billion in bonds? 6. If the Fed wants to change income by +$245.0 billion, what must be the change in bonds bought (+) or sold (-) in the market?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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