The following graph represents the money market in a hypothetical economy. As in the United States, this economy has a central bank called the Fed,but unlike in the United States, the economy is closed (that is, the economy does not interact with other economies in the world). The money marketis currently in equilibrium at an interest rate of 3% and a quantity of money equal to $0.4 trillion, as indicated by the grey star.5.0Money DemandNew MS Curve++New Equilibrium1:07 PM4/29/2022INTEREST RATE (Percent)4.54.03.53.02.52.01.5LL'O0 ΠΟΙSuppose the Fed announces that it is raising its target interest rate by 75 basis points, or 0.75 percentage point. To do this, the Fed will use open-market operations to▼ themoney bythe public.Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money supply curve (MS) in thecorrect location. Place the black point (plus symbol) at the new equilibrium interest rate and quantity of money.Suppose the following graph shows the aggregate demand curve for this economy. The Fed's policy of targeting a higher interest rate willthe cost of borrowing, causing residential and business investment spending toand the quantity of output demanded toat each price level.Shift the curve on the graph to show the general impact of the Fed's new interest rate target on aggregate demand.ReadSpeakAggregate Demand➤1:0G4/29/O

Fed is the central bank of United States which controls the supply of money in the economy.

The following graph represents the money market in a hypothetical economy. As in the United States, this economy has a central bank called the Fed, but unlike in the United States, the economy is closed (that is, the economy does not interact with other economies in the world). The money market is currently in equilibrium at an interest rate of 3% and a quantity of money equal to $0.4 trillion, as indicated by the grey star. 5.0 New MS Curve Money Demand + New Equilibrium 1:07 PM 4/29/2022 INTEREST RATE (Percent) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 L C O 0

The following graph represents the money market in a hypothetical economy. As in the United States, this economy has a central bank called the Fed, but unlike in the United States, the economy is closed (that is, the economy does not interact with other economies in the world). The money market is currently in equilibrium at an interest rate of 3% and a quantity of money equal to $0.4 trillion, as indicated by the grey star. 5.0 New MS Curve Money Demand + New Equilibrium 1:07 PM 4/29/2022 INTEREST RATE (Percent) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 L C O 0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that the central bank wants to stimulate the economy by increasing the money supply. The bankers estimate that the velocity of money is 3.3 and that the price level will increase from 120 to 128 due to the stimulus. Using the quantity equation of money, what will be the increment of a $320 billion dollar increase in the money supply on the quantity of goods (In Billions)and services in the economy given an initial money supply of $4.1 trillion? (Please round your answer to include 2 decimal places. Enter the ammoun in Billions, that is, If the total quantity decreases by 1 billion, enter your answer as -1.)
Suppose the money market for some hypothetical economy is given by the following graph, which plots the money demand and money supply curves. Assume the central bank in this economy (the Fed) fixes the quantity of money supplied. Suppose the price level decreases from 150 to 125. Shift the appropriate curve on the graph to show the impact of a decrease in the overall price level on the market for money. ? INTEREST RATE (Percent) 12 10 2 0 0 15 Money Supply Money Demand 30 45 60 MONEY (Billions of dollars) 75 90 Money Demand Money Supply
In the Financial Times article, “Fed signals no rate rise until at least 2024 despite growth upgrade” (17 March 2021), we can read: “Federal Reserve officials signalled that they expect to keep interest rates close to zero until at least 2024, even as they sharply upgraded their US growth forecasts because of a massive fiscal stimulus and an accelerating vaccine rollout. [...] The upgrades to the forecasts from Fed officials were significant: whereas in December they predicted 4.2 percent growth this year, that estimate was bumped up to 6.5 percent, which would be the fastest economic expansion since 1984. Meanwhile, the unemployment rate is now forecast to fall to 4.5 percent by the end of the year instead of 5 percent. [...] inflation [...], is expected to rise to 2.2 percent and above the central bank’s 2 percent target, compared with the smaller rise to 1.8 percent predicted in December. [...] The Fed has pledged to maintain rock-bottom interest rates until the US reaches full…
Suppose that the central bank wants to stimulate the economy by increasing the money supply. The bankers estimate that the velocity of money is 2.8, and that the price level will increase from 130 to 150 due to the stimulus. Using the quantity equation of money, what will be the impact of an $800 billion dollar increase in the money supply on the quantity of goods(In billions) and services in the economy given an initial money supply of $4 trillion?(Please round your answer to include 2 decimal places.)
Consider the money market in the accompanying graph. Initially, the equilibrium interest rate and quantity are represented by the point, El. Suppose the central bank reduces the money supply. Adjust the graph of the money market to illustrate this change and label the new equilibrium by moving the point, E2. After this recent change in the money supply, what is true about the point E1? The quantity of money demanded is more than the quantity of money supplied. The quantity of money demanded is less than the quantity of money supplied. The quantity of money supplied is more than the quantity of money demanded. Those selling interest-bearing nonmonetary assets will face market pressure to lower their interest rates. Interest rate (%) Incorrect 10 9 8 7 6 5 4 3 2 1 0 0 1 2 E2 Money Market EI 3 4 5 6 Quantity of money 7 8 MS MD 9 10
The following graph shows the market for federal reserves. The kinked orange curve Supply FF shows the supply of federal funds. It is vertical at the current amount of available reserves and flattens when the federal funds rate reaches the prevailing discount rate. The blue curve shows the demand for federal funds, which is downward sloping. Suppose that the prevailing federal funds rate is 2% and the discount rate is 4%. The current amount of bank reserves is $2 million. Suppose the Federal Reserve implements a contractionary policy by selling $1 million worth of government securities in open market operations. On the following graph, show the effect of a contractionary OMO on the Fed funds market. (Hint: Use the green points (triangle symbols) to plot the two-part supply curve and the grey point (star symbol) to show the new federal funds rate.) FEDERAL FUNDS RATE 5 0 0 The Market for Federal Reserves Supply FF 2 QUANTITY OF EXCESS RESERVES (Millions of Dollars) 3 As a result of a…
6. Changes in the money supply The following graph represents the money market for some hypothetical economy. This economy is similar to the United States in the sense that it has a central bank called the Fed, but a major difference is that this economy is closed (and therefore does not have any interaction with other world economies). The money market is currently in equilibrium at an interest rate of 3.5% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. INTEREST RATE (Percent) 5.5 5.0 New MS Curve Money Demand 4.5 4.0 3.5 3.0 2.5 2.0 1.5 0 0.1 0.2 Money Supply 0.3 0.4 0.5 0.6 0.7 0.8 MONEY (Trillions of dollars) New Equilibrium (?) Suppose the Fed announces that it is raising its target interest rate by 50 basis points, or 0.5 percentage points. To do this, the Fed will use open- market operations to the money by the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing…
Answer to 2 decimal digits
Suppose that the supply of credit cards is given by (1/200) X = q, the nominal interest rate is 0.06, real GDP is Y = 52, and the price level is P = 105. What must be the quantity of money supplied for this money market to be in equilibrium. Round your answer to the nearest whole number.
2. The theory of liquidity preference and the downward-slopingaggregate demand curve The following graph shows the money market in a hypothetical economy. The central bank in this economy is called the Fed. Assume that the Fed fixes the quantity of money supplied. Suppose the price level decreases from 90 to 75. Shift the appropriate curve on the graph to show the impact of a decrease in the overall price level on the market for money. 12 Money Supply 10 Money Demand Money Supply MD1 2 MD2 10 20 30 40 50 60 MONEY (Billions of dollars) INTEREST RATE (Percent)
The price level and the market for bank reserves The following graph shows the market for bank reserves in a hypothetical economy. Suppose the price level decreases from 110 to 70. Shift the appropriate curve on the following graph to show the impact of a decrease in the overall price level. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drags it a little farther. Analyze the effects of this change in the price level, then fill in the following table with these results. Effect Quantity of bank reserves supplied _________ (increase/ decreases/remains the same ) Quantity of real GDP demanded ___________ (increases/decreases/remain the same ) NOTE- THIS QUESTION IS A ONE QUESTION BUT IT IS DIVIDED INTO SUBPARTS . PLEASE ANSWER ALL QUESTUIONS WITH EXPLANATION.
TOPIC: A possible break in the Note: everything you need will be in the picture