Suppose that changes in bank regulations expand the availability of credit cards, so people need to hold less cash. a. How does this event affect the demand for money? (3%) b. How does this event affect the money velocity? (3%) c. If the Fed does not respond to this event, what will happen to the price level? (3%) d. If the Fed wants to keep the price level stable, what should it do? (3%)

Q: What is the better solution to solve the crisis than increase money supply? How does this work?…

A: The supply curve has received a shock as AS1 shifts to AS2. The main reason behind this is that…

Q: Suppose banks decide to hold more excess reserves relative to deposits while the public retained the…

A: In an economy, money supply include the money circulated in the markets and the money held by the…

Q: An open-market sale of securities by the Fed results in ________ in reserves and ________ in the…

A: Open market operation is used to change the money supply.  Money supply is the amount of money…

Q: Unexpectedly, the US government announced that it would be drastically reducing government spending…

A: Aggregate demand is composed of consumption spending, investment spending, government spending and…

Q: 8. Using policy to stabilize the economy The government has the ability to influence the level of…

A:

Q: Ther Fed creates a lower and upper bound for the federal funds rate and the incentives that drive…

A: This can be described as the central authority of the banking system of that particular nation. The…

Q: If there is a shortage of money in the economy, then : A. The purchasing power of money will tend to…

A: Money Supply: Money supply indicates the total stock of money available in the economy at the point…

Q: Holding money demand constant, if the Fed pursues loosemoney and increase money supply, which will…

A: Loose monetary policy refers to expansionary monetary policy, which is used with the aim to increase…

Q: Which of the following statements about the income velocity of money (V) is NOT correct? a. It is an…

A: The income velocity of money (V) is defined as the number of times per year that a unit of currency…

Q: 56. Modern Monetary Theory (MMT) rejects which of the following assumptions of classical economics…

A: Quantity theory of money assumes that the velocity of money remains constant. Velocity of money…

Q: Question 2: Suppose the money supply is $50 in an economy where the nominal GDP is $1000, and the…

A: Here we calculate the following terms by using the given information so the calculation of the…

Q: 65. According to liquidity preference theory, a decrease in money demand for some reason other than…

A: The Liquidity Preference Theory provides insights into how individuals and businesses decide to hold…

Q: If the Fed decides to leave the federal funds rate target range unchanged, we would expect _______.…

A: Commercial banks overnight lend and borrow from one another at the federal funds rate, which is the…

Q: 64)In response to already low interest rates doing little to stimulate the economy in the Great…

A: In the presence of low interest rates doing a little to uplift the economy during the great…

Q: he Fed believes if inflation is high and GDP is high, unemployment is likely to: a. Increase b.…

A: Inflation and unemployment are negatively related.  Higher inflation leads to decrease in…

Q: #4 Use the IS-MP model to show what happens when the Federal Reserve raises the federal funds…

A: Disclaimer: Since you have posted multiple questions, I am providing you with the answer to the…

Q: After the March 16, 2022 meeting Links to an external site.of the Federal Open Market Committee…

A: Answer is “raise; federal funds rate; inflationary gap” As the economy was in inflationary gap. The…

Q: Suppose a country has a money demand function (M/P)d = kY, where k is a constant parameter. The…

A: Since you have asked multiple sub-parts, we would be answering the first 3 for you. In order to get…

Q: Problem Solving 1. Suppose the Central Bank reduces the money supply by 5 percent. Assume the…

A: Aggregate Demand is the prevailing demand for all the services and goods in the country’s economy…

Q: It is 1979 and there is a sudden decline in oil supplies due to political turmoil in the Middle…

A: Monetary policy Monetary policy is the instrument of a central bank and monetary authority of the…

Q: Suppose that this year’s money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is…

A: Since there are multiple sub-parts in the question, only the first three sub-parts will be answered…

Q: Supply-side economics is the school of thought that advocates the use of   A) monetary policy to…

A: The supply side economics says that economic growth is determined by the supply. It is not affected…

Q: ume th money velóčitý iš čóńštánt. a. Suppose the money supply increases by 12%. What do you expect…

A: a). In short-runAssumption: 1) Price level is fixed: 2) aggregate supply curve is flat.In the short…

Q: The economy's unemployment rate is 2% and the inflation rate is 18%. The most appropriate policy for…

A: As we know that Phillips curve shows the relationship between inflation and Unemployment rate . And…

Q: What trade offs does the Fed face, particularly in the short run in attempting to reach its goals?…

A: Monetary policy refers to the set of policies a central bank of a country uses during the time of…

Q: 48)Which of the following is TRUE when we say that the Fed has a target inflation rate of 2%?…

A: Answer: Correct option: option (c) Explanation: Inflation refers to the increase in the prices of…

Q: What is the likely effect on inflation when a central bank increases the money supply rapidly? A.…

A: The issue is recognizing the logical impact of expansion when a national bank chooses to expand the…

Q: Provide the equation for the velocity of money in terms of Price level (P), output (Y), and the…

A: According to quantity theory of money, the nominal GDP can be written as GDP=M*V.    (1)Where M is…

Q: B. induces households to increase consumption. C. increases aggregate demand for goods and services.…

A: The Fed buys and sells securities from bank in order to regulate the interest rate in the economy.…

Q: To fight inflation, the Fed will: (Select all that apply)   A. Sell securities on the open market.…

A: Monetary policy is the policy used by the central bank of the country to control the money supply in…

Q: Suppose that the liquidity effect is immediate and smaller than the other effects, and our…

A: In economics, the relationship between the money supply and interest rates is a topic of great…

Q: If the Fed decides to sell U.S. Treasury bonds on the open market, how will the money supply and…

A: Due to selling of treasury bonds,money supply would decrease. Interest rates would increase,because…

Q: The economy can go into recession if there is O A) a decrease in SRAS. B) an increase in AD. C) an…

A: We only answer one question so we will answer the first one. Please submit a new question specifying…

Q: What is the tradeoff that the Fed faces in the short run?   In the short run, the Fed faces a…

A: The United States of America's central bank is referred to as FED or the Federal Reserve System. The…

Q: The Fed's mandated goals are "maximum employment, stable prices, and moderate long-term interest…

A: Introduction  The goals of price stability and moderate long-term interest rates go together. So,…

Q: An increase in the quantity of money leads to

A: The interest rate in the economy is determined at the intersection of the money demand and the money…

Q: The Fed is most likely to raise the federal funds rate target when the Fed expects _______.     A.…

A: Federal funds rate refers to the interest rate that a commercial bank charges from another…

Q: and the long run. b. If the Bank of Canada cares about keeping output and employment at th levels,…

A: *Answer:

Q: Keynesian economists believe that __________________. Group of answer choices A. the velocity of…

A: The theory of Keynesian economics states that the government should increase demand to improve…

Q: When the federal reserve increases money investment and unemployment rate __- .A. decreases,…

A: Money supply is the total amount of money supplied at the given interest rates in the economy within…

Q: A monetary policy target is a variable that O the Fed can affect directly. O equals one of the Fed's…

A: In an economy, monetary policy refers to one of the type of macroeconomic policy to influence the…

Q: If the Fed lowers interest rates, the value of the US dollar will___ which will lead do a(n)____ in…

A: Answer: Correct option: (c) decrease, increase Explanation: If the Fed lowers the interest rate then…