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- Easy Beginner Economics Question:Which of the following would be classed as an expansionary monetary policy? Ο Α. A decrease in the quantity of money. ОВ. A decrease in interest rates. C. An increase in government taxation. O D. An increase in government expenditure. O E. An increase in VAT.What is the advantage of monetary policy over fiscal policy? O. Monetary policy can be implemented faster than fiscal policy O. Once implemented, the effect of monetary policy can be realized faster than fiscal policy O. The monetary policy affecting Investment category, which is more flexible than the Consumption and Government expenditure category O. Monetary policy is more effective at reducing the recessionary/inflationary gap
- The U.S. monetary policy is conducted to achieve two goals of price stability and fullemployment output. In the short run, monetary policy can influence economic activity through the monetary transmission mechanism. Which of the following is false?a. Monetary expansion tends to encourage consumption by lowering the interest rate. b. Monetary expansion tends to encourage investment by lowering the interest rate. c. Monetary expansion tends to lead to appreciation of the domestic currency, which encourages the foreign imports.d. Monetary contraction leads to lower asset prices, which tends to discourage investment.e. All of the above are correctA4Fiscal and Monetary Stimulus A. Create a graph of equilibrium in the IS-LM model. Show the effect of an expansionary monetary policy. Summarize your results. B. If the central bank’s goal is to maximize output, what interest rate will we expect in equilibrium? C. Starting from the equilibrium described in (B), suppose investors experience a decrease in “animal spirits.” What happens to output? Can the central bank offset this with expansionary monetary policy? D. What could fiscal authorities do to offset the shock to animal spirits described in (C)?
- Consider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) 1 = 400 – 15r M = 200 + Y – 100r G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. Department of Economics a) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output.Suppose that government spending is increased at thesame time that an autonomous monetary policy tightening occurs. What will happen to the position of theaggregate demand curve?ent40.docx Name: Problem #6: Economist As an economist for the Canadian government, you need to ensure that our dollar is strong enough to continue buying what we need. After gathering your information, you start doing your work. The Canadian dollar loses approximately 2.3% of its buying power each year due to inflation. Inflation refers to the decline of purchasing power for a given currency over time. a) If the inflation rate of 2.3% continues each year, what will be the buying power of today's Canadian dollar five years from now? Format your answer in dollars! b) The government decides to use this model to forecast what their dollar will be worth over the next 15 years. Is this model effective? Are there any limitations or issues with doing this?
- When central bank sells securities in the open market, which of the following set of events is most likely tofollow? An increase in interest rates, an increase in the government budget deficit, and a movement toward tradesurplus A decrease in the money supply, an increase in interest rates, and a decrease in aggregate An decrease in the money supply, an increase in interest rates, and an increase in aggregate demand. An increase in the money supply, an increase in interest rates, and a decrease in aggregate demandA tight monetary policy that involves high interest rates may lead to a number of related problems. Which of the following is not likely to be a consequence of such a policy? Select one: A. Higher cost for producers B. Cost-push inflationary pressures C. Increased costs for government D. Reduced investmentContractionary monetary policy would ______ interest rates and _______ the U.S. dollar, leading to a(an) ________ in U.S. net exports. increase, appreciate, decrease. increase, depreciate, decrease. decrease, appreciate, increase. decrease, depreciate, increase.
