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lacroeconomics LESSON 6 ACTIVITY 42 Monetary Policy now bring together all of the pieces of the process by which monetary policy is transmitted to the onomy, and we examine both the short-run effects and the long-run effects of monetary policy. gure 42.1 fects of Monetary Policy LRAS BAR SRAS AD REAL GDP 1. Suppose that initially the economy is at the intersection of AD and SRAS in Figure 42.1. (A) What monetary policy should the Fed implement to move the economy to full-employment output? (B) If the Fed is going to use open market operations, it should (buy / sell) Treasury securities. (C) What is the effect on Treasury security (bond) prices? (D) In the short run, what is the effect on nominal interest rates? Explain. (E) In the short run, what happens to real output? Explain how the Fed's action results in a change in real output. B6730

lacroeconomics LESSON 6 ACTIVITY 42 Monetary Policy now bring together all of the pieces of the process by which monetary policy is transmitted to the onomy, and we examine both the short-run effects and the long-run effects of monetary policy. gure 42.1 fects of Monetary Policy LRAS BAR SRAS AD REAL GDP 1. Suppose that initially the economy is at the intersection of AD and SRAS in Figure 42.1. (A) What monetary policy should the Fed implement to move the economy to full-employment output? (B) If the Fed is going to use open market operations, it should (buy / sell) Treasury securities. (C) What is the effect on Treasury security (bond) prices? (D) In the short run, what is the effect on nominal interest rates? Explain. (E) In the short run, what happens to real output? Explain how the Fed's action results in a change in real output. B6730

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lacroeconomics LESSON 6 I ACTIVITY 42 Monetary Policy W now bring together all of the pieces of the process by which monetary policy is transmitted to the onomy, and we examine both the short-run effects and the long-run effects of monetary policy. gure 42.1 fects of Monetary Policy LRAS SRAS AD REAL GDP 1. Suppose that initially the economy is at the intersection of AD and SRAS in Figure 42.1. (A) What monetary policy should the Fed implement to move the economy to full-employment output? (B) If the Fed is going to use open market operations, it should (buy / sell) Treasury securities. (C) What is the effect on Treasury security (bond) prices? (D) In the short run, what is the effect on nominal interest rates? Explain. (E) In the short run, what happens to real output? Explain how the Fed's action results in a change in real output. Activity written by Rae Jean B. Goodman, U.S. Naval Academy, Annapolis, Md. Advanced Placement Economics Macroeconomics: Student Activities O National Council on Economic Education, New York, N.Y. PRICE LEVE Print F Value ET -210901- d o u Bo
Transcribed Image Text:lacroeconomics LESSON 6 I ACTIVITY 42 Monetary Policy W now bring together all of the pieces of the process by which monetary policy is transmitted to the onomy, and we examine both the short-run effects and the long-run effects of monetary policy. gure 42.1 fects of Monetary Policy LRAS SRAS AD REAL GDP 1. Suppose that initially the economy is at the intersection of AD and SRAS in Figure 42.1. (A) What monetary policy should the Fed implement to move the economy to full-employment output? (B) If the Fed is going to use open market operations, it should (buy / sell) Treasury securities. (C) What is the effect on Treasury security (bond) prices? (D) In the short run, what is the effect on nominal interest rates? Explain. (E) In the short run, what happens to real output? Explain how the Fed's action results in a change in real output. Activity written by Rae Jean B. Goodman, U.S. Naval Academy, Annapolis, Md. Advanced Placement Economics Macroeconomics: Student Activities O National Council on Economic Education, New York, N.Y. PRICE LEVE Print F Value ET -210901- d o u Bo
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