Can you do all ! PLZ Part 1:1. Suppose the monetary base is $80,000, the reserve requirement is 0.20, the currency-deposit ratio is .20,and excess reserves ratio is 0.20. In each case below, explain what would happen to: (i) the monetarybase, (ii) the money multiplier, (iii) the money supply, (iv) interest rates, and (v) bond prices.Explain why each would or would not change (a few words will suffice). Give numerical answers whereyou have enough information. For each answer, compare the change to the initial conditions. (Nographs are required.)1A. Calculate the initial money multiplier and money supply:Money Multiplier_Money Supply1.B. The Fed sells $2,000 in bonds in open market operations.Monetary Base:Money Multiplier:Money Supply:Interest Rates:Bond Prices:1.C. The Treasury sells $2,000 in bonds to finance a government stimulus package.Monetary Base:Money Multiplier:Money Supply:Interest Rates:Bond Prices: 1.D. The Fed reduces the reserve requirement to zero.Monetary Base:Money Multiplier:Money Supply:Interest Rates:Bond Prices:1.E. The Fed intervenes in the foreign exchange market selling $1,000 dollars and buying euros.Monetary Base:Money Multiplier:Money Supply:Interest RatesBond Prices:1.F. Explain the Taylor rule (be sure to provide the equation and tell what the central bank will do). If thecentral bank of a country has a policy of inflation targeting, what does this imply about the Taylor rule? Dothe Fed and European Central Bank follow the Taylor rule? Explain your answers.1.G. Suppose a country is at potential GDP and the government decides to balance the fiscal budget byreducing government spending. Illustrate and explain the effects on GDP, interest rates, and prices using anIS-LM graph and an AD-SAS graph.1.H. Suppose the Fed responds to the effort to balance the budget in IG by following the Taylor rule. Whatwould the Fed do? Explain why. Explain what would happen to GDP, interest rates, and prices. Illustrate onboth an IS-LM and an AD-SAS graph, comparing the equilibrium in 1G to the new equilibrium after theFed acts (either use new graphs or carefully label the ones used in part 1G so that it is clear which curvesare shifting and what the effects are on GDP, interest rates, and prices).

Since you have posted a question with multiple sub-parts, we will provide the solution only to the…

Part 1: 1. Suppose the monetary base is $80,000, the reserve requirement is 0.20, the currency-deposit ratio is.20, and excess reserves ratio is 0.20. In each case below, explain what would happen to: (i) the monetary base, (ii) the money multiplier, (iii) the money supply, (iv) interest rates, and (v) bond prices. Explain why each would or would not change (a few words will suffice). Give numerical answers where you have enough information. For each answer, compare the change to the initial conditions. (No graphs are required.) 1A. Calculate the initial money multiplier and money supply: Money Multiplier_ Money Supply 1.B. The Fed sells $2,000 in bonds in open market operations. Monetary Base: Money Multiplier: Money Supply: Interest Rates: Bond Prices: 1.C. The Treasury sells $2,000 in bonds to finance a government stimulus package. Monetary Base: Money Multiplier: Money Supply: Interest Rates: Bond Prices:

Part 1: 1. Suppose the monetary base is $80,000, the reserve requirement is 0.20, the currency-deposit ratio is.20, and excess reserves ratio is 0.20. In each case below, explain what would happen to: (i) the monetary base, (ii) the money multiplier, (iii) the money supply, (iv) interest rates, and (v) bond prices. Explain why each would or would not change (a few words will suffice). Give numerical answers where you have enough information. For each answer, compare the change to the initial conditions. (No graphs are required.) 1A. Calculate the initial money multiplier and money supply: Money Multiplier_ Money Supply 1.B. The Fed sells $2,000 in bonds in open market operations. Monetary Base: Money Multiplier: Money Supply: Interest Rates: Bond Prices: 1.C. The Treasury sells $2,000 in bonds to finance a government stimulus package. Monetary Base: Money Multiplier: Money Supply: Interest Rates: Bond Prices:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Can you do all ! PLZ

Part 1:
1. Suppose the monetary base is $80,000, the reserve requirement is 0.20, the currency-deposit ratio is .20,
and excess reserves ratio is 0.20. In each case below, explain what would happen to: (i) the monetary
base, (ii) the money multiplier, (iii) the money supply, (iv) interest rates, and (v) bond prices.
Explain why each would or would not change (a few words will suffice). Give numerical answers where
you have enough information. For each answer, compare the change to the initial conditions. (No
graphs are required.)
1A. Calculate the initial money multiplier and money supply:
Money Multiplier_
Money Supply
1.B. The Fed sells $2,000 in bonds in open market operations.
Monetary Base:
Money Multiplier:
Money Supply:
Interest Rates:
Bond Prices:
1.C. The Treasury sells $2,000 in bonds to finance a government stimulus package.
Monetary Base:
Money Multiplier:
Money Supply:
Interest Rates:
Bond Prices:

1.D. The Fed reduces the reserve requirement to zero.
Monetary Base:
Money Multiplier:
Money Supply:
Interest Rates:
Bond Prices:
1.E. The Fed intervenes in the foreign exchange market selling $1,000 dollars and buying euros.
Monetary Base:
Money Multiplier:
Money Supply:
Interest Rates
Bond Prices:
1.F. Explain the Taylor rule (be sure to provide the equation and tell what the central bank will do). If the
central bank of a country has a policy of inflation targeting, what does this imply about the Taylor rule? Do
the Fed and European Central Bank follow the Taylor rule? Explain your answers.
1.G. Suppose a country is at potential GDP and the government decides to balance the fiscal budget by
reducing government spending. Illustrate and explain the effects on GDP, interest rates, and prices using an
IS-LM graph and an AD-SAS graph.
1.H. Suppose the Fed responds to the effort to balance the budget in IG by following the Taylor rule. What
would the Fed do? Explain why. Explain what would happen to GDP, interest rates, and prices. Illustrate on
both an IS-LM and an AD-SAS graph, comparing the equilibrium in 1G to the new equilibrium after the
Fed acts (either use new graphs or carefully label the ones used in part 1G so that it is clear which curves
are shifting and what the effects are on GDP, interest rates, and prices).

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