QUESTION 43 Which of the following statements best describes quantitative easing? O a. the central bank sells large quantities of government bonds to financial institutions to increase liquidity. O b. financial institutions purchase government bonds from the central bank and restrict lending. O c. financial institutions sell government bonds to the central bank and increase lending. O d. the central banks purchase government bonds and financial institutions purchase more government bonds to restore liquidity.

QUESTION 43 Which of the following statements best describes quantitative easing? O a. the central bank sells large quantities of government bonds to financial institutions to increase liquidity. O b. financial institutions purchase government bonds from the central bank and restrict lending. O c. financial institutions sell government bonds to the central bank and increase lending. O d. the central banks purchase government bonds and financial institutions purchase more government bonds to restore liquidity.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. Define the policy of quantitative easing. Is this a policy that is consistent with the underlying assumptions behind the Real Business Cycle model, the Keynesian Coordination Failure Model, or the Small Open Economy model? Why or why not?
b. What substantial risks to the nation was the director of the CBO referring to? The director was referring to O A. really not much of a concern at all because the U.S. economy continues to grow at a rate higher than the rate at which the debt is rising, so that the debt-to-GDP ratio is falling and a high debt level is a non-issue. B. the certainty that the government will go bankrupt if the ratio of debt to GDP rises too high and it is no longer able to fulfill its obligations to its citizens. C. a high and rising debt-to-GDP ratio putting upward pressure on interest rates, thereby crowding out private investment and slowing economic growth, and rising interest payments on that rising debt eventually putting pressure on the federal government to reduce program spending or raise taxes. D. a high and rising debt-to-GDP ratio putting downward pressure on interest rates, thereby encouraging private investment and increasing economic growth, and falling interest payments on that rising…
15. Consider the economy of Farland. C = 200 + 0.75(Y – T) I = 200 – 25r M = Y – 100r M = 1000; P = 2 G = 100; T = 100 d P a. Find equilibrium interest rate and the equilibrium level of income Y b. With the initial values for monetary and fiscal policy, suppose that the price level rises from 2 to 4. What happens? What are the new equilibrium iaterest rate and level of income? c. Derive and graph an equation for the aggregate demand curve. What happens to this aggregate demand curve if government increases its purchaşes or National Bank provides more money supply?
Macmillan Learning b. A central bank reduces the rate of interest that it charges to commercial banks on loans. expansionary c. The Federal Reserve purchases bonds on the open market. O expansionary d. The Federal Reserve decreases the discount rate. expansionary O contractionary expansionary contractionary contractionary e. A central bank increases the percentage of deposits that banks are required to keep in vaults. O contractionary.
2. Suppose country A has a central bank with full credibility, and country B has a central bank with no credibility. Assume that in 2020, both countries are hit with the same COVID-19 shock.If the both central banks announce an autonomous easing policy to reduce the unemployment rate, a) How does the credibility of each country’s central bank affect the speed of adjustment of the aggregate supply curve to policy announcements? b) How does this result affect output stability? (Use aggregate supply and demand diagrams to demonstrate)
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4 Which of the following policies did the Fed follow after 2014? O To unwind expansionary policy measures and try to return to a normal stance of policy. O To get the economy out of a recession. O To stimulate the U.S. financial and banking systems. O To lower interest rate in an attempt to stimulate economic growth. O None of these. 5 The recent use of discretionary fiscal policy was facilitated by O the elimination of the balanced budget amendment. O the ineffectiveness of monetary policy. O changing beliefs among economists about the lags of monetary policy. O the use of automatic policy rules. O the prediction of high rates of unemployment that could otherwise occur in the future if government did nothing. 6 For real and potential GDP to be equal, the budget surplus has to be zero. O True O False
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Figure 2 P. LRAS SRAS AD Y. Y. Refer to Figure 2. Suppose the economy is currently at point A. To restore full employment, the Federal Reserve should O a. purchase government bonds, which will reduce the money supply and shift the AD curve left. Ob sell government bonds, which will inerease the money supply and shift the AD curve right. purchase government bonds, which will inerease the moncy supply and shift the AD curve right. O d. sell government bonds, which will reduce the money supply and shift the AD curve left. P.
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