Suppose the Federal Reserve shifts to an expansionary monetary policy by buying bonds through open-market operations. This problem will work through the short-run effects of this move according to the Keynesian transmission mechanism The following graph shows the money demand and money supply curves As a result of the Fed's policy, the interest rate falls or rises 12%, 4%, 8%, 6%, 2%, 10% Adjust the following graph to show the effect of the Fed's expansionary monetary policy. QUANTITY OF MONEY You can move S to the left 1 time or to the right 1 time and you can move D to the right 1 time or you can move it to the left 1 The following graph shows the demand for investment time. Show the short-run effect of the Fed's expansionary monetary policy by shifting the curve or placing the black point (plus symbol) along the curve. Hint: Be sure the new interest rate corresponds to the interest rate you have on the top graph INVESTMENT of dollars) Demand for You can move "Demand for Investment to the left 1 time or to the right 1 time. Plot equilibrium (+) on the graph with the coordinates. urves in the goods and services market before the The following graph shows the aggregate demand (AD) and short-run aggregate supply (SRAS) curves in t Fed implements its expansionary policy Show the short-run effect of the change in investment demand you illustrated on the previous graph by shifting the appropri curve on the graph SHAS SHAS You can move the SRAS to the left 1 time or to the right 1 time. You can move the AD to the left 1 time or to the right 1 time. move or less Fill in the blanks to interpret the effect of the Fed's policy. When the Fed buys bods, the amount of money in circulation in the economy Up OR increases or decreases down This drives interest rates, in capital improvements like new factories and upgraded equipment. The result is in the equilibrium level of Real GDP in the equilibrium price level, and which causes aggregate demand, an increase, no an increase, no change, or a decrease an increase, no change, or a decrease change, or a decrease
Suppose the Federal Reserve shifts to an expansionary monetary policy by buying bonds through open-market operations. This problem will work through the short-run effects of this move according to the Keynesian transmission mechanism The following graph shows the money demand and money supply curves As a result of the Fed's policy, the interest rate falls or rises 12%, 4%, 8%, 6%, 2%, 10% Adjust the following graph to show the effect of the Fed's expansionary monetary policy. QUANTITY OF MONEY You can move S to the left 1 time or to the right 1 time and you can move D to the right 1 time or you can move it to the left 1 The following graph shows the demand for investment time. Show the short-run effect of the Fed's expansionary monetary policy by shifting the curve or placing the black point (plus symbol) along the curve. Hint: Be sure the new interest rate corresponds to the interest rate you have on the top graph INVESTMENT of dollars) Demand for You can move "Demand for Investment to the left 1 time or to the right 1 time. Plot equilibrium (+) on the graph with the coordinates. urves in the goods and services market before the The following graph shows the aggregate demand (AD) and short-run aggregate supply (SRAS) curves in t Fed implements its expansionary policy Show the short-run effect of the change in investment demand you illustrated on the previous graph by shifting the appropri curve on the graph SHAS SHAS You can move the SRAS to the left 1 time or to the right 1 time. You can move the AD to the left 1 time or to the right 1 time. move or less Fill in the blanks to interpret the effect of the Fed's policy. When the Fed buys bods, the amount of money in circulation in the economy Up OR increases or decreases down This drives interest rates, in capital improvements like new factories and upgraded equipment. The result is in the equilibrium level of Real GDP in the equilibrium price level, and which causes aggregate demand, an increase, no an increase, no change, or a decrease an increase, no change, or a decrease change, or a decrease
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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TOPIC: The Keynesian transmission mechanism
Note: I added the options to the fill in the blanks. Make sure to do the graphs pls. I believe the tests are a bit blurry but you can make out what it says (probably). Thanks
Transcribed Image Text:Suppose the Federal Reserve shifts to an expansionary monetary policy by buying bonds through open-market operations. This problem will work
through the short-run effects of this move according to the Keynesian transmission mechanism
The following graph shows the money demand and money supply curves
As a result of the Fed's policy, the interest rate
falls or rises
12%, 4%, 8%, 6%, 2%, 10%
Adjust the following graph to show the effect of the Fed's expansionary monetary policy.
QUANTITY OF MONEY
You can move
S to the left 1
time or to the
right 1 time
and you can
move D to the
right 1 time or
you can move
it to the left 1
The following graph shows the demand for investment
time.
Show the short-run effect of the Fed's expansionary monetary policy by shifting the curve or placing the black point (plus symbol) along the curve.
Hint: Be sure the new interest rate corresponds to the interest rate you have on the top graph
INVESTMENT of dollars)
Demand for
You can move
"Demand for
Investment to
the left 1 time
or to the right 1
time. Plot
equilibrium (+)
on the graph
with the
coordinates.
urves in the goods and services market before the
The following graph shows the aggregate demand (AD) and short-run aggregate supply (SRAS) curves in t
Fed implements its expansionary policy
Show the short-run effect of the change in investment demand you illustrated on the previous graph by shifting the appropri curve on the graph
SHAS
SHAS
You can move
the SRAS to
the left 1 time
or to the right 1
time. You can
move the AD
to the left 1
time or to the
right 1 time.
move or less
Fill in the blanks to interpret the effect of the Fed's policy.
When the Fed buys bods, the amount of money in circulation in the economy
Up
OR
increases or
decreases
down
This drives interest rates,
in capital improvements like new factories and upgraded equipment. The result is
in the equilibrium level of Real GDP
in the equilibrium price level, and
which causes
aggregate demand,
an increase, no
an increase, no change, or a decrease an increase, no change, or a decrease change, or a decrease
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