The graph shows equilibrium in the money market. The equilibrium interest rate is determined at point E where the money demand and money supply curves intersect. Suppose the Fed wants to lower the equilibrium interest rate 1.) Using the line drawing tool, draw a new money demand or money supply curve that can show how the Fed would accomplish this objective. Property label the new line. 2.) Using the point drawing tool, identify the new equilibrium point. Label it F. Note: Carefully follow the instructions above, and only draw the required objects. 0 10 8- 7- 4- 3 Money Market Equilibrium Interest rate, i MS 1 MD₁ 10 12 14 16 18 20 Quantity of Money, M (billions of dollars)

The graph shows equilibrium in the money market. The equilibrium interest rate is determined at point E where the money demand and money supply curves intersect. Suppose the Fed wants to lower the equilibrium interest rate 1.) Using the line drawing tool, draw a new money demand or money supply curve that can show how the Fed would accomplish this objective. Property label the new line. 2.) Using the point drawing tool, identify the new equilibrium point. Label it F. Note: Carefully follow the instructions above, and only draw the required objects. 0 10 8- 7- 4- 3 Money Market Equilibrium Interest rate, i MS 1 MD₁ 10 12 14 16 18 20 Quantity of Money, M (billions of dollars)

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 the Federal Reserve ("the Fed") shifts to an expansionary monetary policy by buying bonds through open-market operations. Assume that this policy is unanticipated. This problem will work through the short-run effects of this move. The following graph shows the money demand and money supply curves. Show the effect of the Fed's expansionary monetary policy by shifting one or both of the curves, and ignore any potential feedback effects. As a result of the Fed's policy, the interest rate to . Money DemandMoney Supply03006009001200150018006543210INTEREST RATE (Percent)QUANTITY OF MONEY (Billions of dollars)Money Demand Money Supply 900, 3 The following graph shows the demand for investment. Show the short-run effect of the Fed's expansionary monetary policy by shifting the curve or moving the point along the curve. Again, ignore any potential feedback effects. Be sure the new interest rate corresponds to the interest rate you have on the top graph.…
Suppose the economy is in long-run equilibrium with GDP approaching $23T and the unemployment rate is approaching 4%. Now, let's say that the Fed has decided to decrease the money supply by 6%! The Fed proposes this move by raising the Prime Rate from the current 3.25 to 4.00 and to sell a new trunk or class of 30-year Treasury Bonds. This was not expected! What might be the short and long run effects on the economy as a whole if this were to take place? What happens to the inflation rate? What happens with unemployment? Like I said, this was actually expected that the Fed might take some sort of constriction action to stave off reduce inflation and to strengthen the money supply. However, President Biden, Congress and the Treasury Department had hoped for no contraction of the money supply until 2023.
please als do the graphs. thanksssssssss
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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 5.5% and a quantity of money equal to $0.4 trillion, designated on the graph by the grey star symbol. 7.5 Money Demand. 6.5 6.0 5.5 6 5.0 4.5 4.0 Money Supply INTEREST RATE (Percent) 7.0 3.5 0 0.1 0.3 0.4 0.5 MONEY (Trillions of dollars) 0.2 0.6 0.7 0.8 New MS Curve ++ New Equilibrium (?) Suppose the Fed announces that it is lowering 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.
Suppose the economy begins at full employment. Label this starting point as point "1." Then, suppose that, due to increased instability in the financial markets, a decrease in investor and consumer confidence occurs. Show the effects on your graph and label the new equilibrium point "2." Lastly, suppose the Federal Reserve wants the economy to return to full-employment as quickly as possible. Should the Fed intervene? If so, show the impact of successful monetary policy on your graph. Label this new equilibrium point "3."
Year 2022 2023 Potential Real GDP $18.1 trillion 18.4 trillion Real GDP $18.1 trillion 18.6 trillion Price Level 150 155 Refer to Table 15-6. Suppose the table above illustrates the values of real and potential GDP and the price level if the Fed does not vote to change their current policy to be more contractionary or expansionary. If the Fed wants to keep real GDP at its potential level in 2023, should the Fed use a contractionary or expansionary policy? Should it raise or lower its interest rate target? How should it conduct open market operations to achieve its goal?
Suppose the reserve requirement for the United States is 8%. Instructions: Round your answers to the nearest whole number. a. Suppose the Federal Reserve wants to increase the money supply. What should it do to accomplish this goal? The Fed could make an [(Click to select) of $50 billion, resulting in a total increase in the money supply of $[ b. Now suppose the Fed wants to decrease the money supply. What should it do to accomplish this goal? The Fed could make an (Click to select) of $40 billion, resulting in a total decrease in the money supply of $ billion. billion.
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