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

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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)
5.
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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The bond market is depicted in the graph to the right. a. The bond demand curve is downward sloping because A. lower bond prices translate into higher interest rates and returns. B. as the interest rate decreases people are willing to buy more bonds. C. the government sells more bonds at lower interest rates. D. the Fed's decision to buy or sell bonds is independent of the interest rate. b. Suppose the Fed decides to buy bonds. 1.) Using the line drawing tool, depict changes in the bond market. Properly label your line. 2.) Using the point drawing tool, label the new equilibrium point 'E₁'. Carefully follow the instructions above, and only draw the required objects. Price of Bonds 1000- 900- 800- 700- 600- 500- 400- 300- 200- 100- 0- 0 T 5 10 So Eo 15 20 25 30 35 Quantity of Bonds D 40 45 7 50 Q