SITUATION: FEDERAL RESERVE EXPANDING THE MONEY SUPPLY Suppose the Federal Reserve decides that it wants to expand the money supply (M1) by 500 billion dollars, and they decide to use open market operations to accomplish their goal. Assume that there is no reserve requirement on checking accounts and that the actual money multiplier for M1 is 5, and expected to stay at 5. Refer to the situation above. What might happen to the economy in the long run? the economy would be stimulated the economy would be contracted prices would increase 100000 the monetary base would remain constant none of the above D

SITUATION: FEDERAL RESERVE EXPANDING THE MONEY SUPPLY Suppose the Federal Reserve decides that it wants to expand the money supply (M1) by 500 billion dollars, and they decide to use open market operations to accomplish their goal. Assume that there is no reserve requirement on checking accounts and that the actual money multiplier for M1 is 5, and expected to stay at 5. Refer to the situation above. What might happen to the economy in the long run? the economy would be stimulated the economy would be contracted prices would increase 100000 the monetary base would remain constant none of the above D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There is a bar on Off‐Main Street called the Rock‐n‐Roll Bar. All the people that go to that bar like to listen to rock‐n‐roll music, and they love live bands. If the bar owner brings bands in to play music on a Saturday night, she will make a lot of money. However there are tenants in this building who get annoyed by the loud music. The benefits/costs to the owner/tenants of having zero, one, two or three bands on a Saturday night are listed below. Assume the bar owner has the right to hire as many bands as she likes. Iftransaction costs were $90, split between the bar owner and the tenants, how manybands would play? What would social welfare be? A. Three bands would play and social welfare would be ‐100.B. Two bands would play and social welfare would be 75.C. Two bands would play and social welfare would be ‐15.D. No bands would play and social welfare would be 0.E. Three bands would play and social welfare would be ‐190
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