Use the "Monetary Policy I" Figure 31-5. If the money and the central bank chooses to buy bonds, then: AD2 will shift to the right, creating an inflationary gap. AD2 may shift to AD₁, creating a recessionary gap. AD₁ may shift to AD2, closing an existing recessionary gap... AD₁ will shift to the left, increasing an existing recessionam AD2 will shift to the right, creating a recessionary gap.

Use the "Monetary Policy I" Figure 31-5. If the money and the central bank chooses to buy bonds, then: AD2 will shift to the right, creating an inflationary gap. AD2 may shift to AD₁, creating a recessionary gap. AD₁ may shift to AD2, closing an existing recessionary gap... AD₁ will shift to the left, increasing an existing recessionam AD2 will shift to the right, creating a recessionary gap.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question #3: Consider an economy described by the following set of values: C = $3.25 trillion mpc = 075 1 = $1.2 trillion d = 0.30 G = $3.5 trillion T = $3 trillion NX = $1.5 trillion f=1 What is the expression for the Monetary Policy (MP) curve? x = 01 λ=1 r=2 What is the expression for the Aggregate Demand (AD) curve? Assume that =1%. What is the real interest rate (r)? and equilibrium level of output? Suppose the Bank of Canada increases r to r=3.5. What is the new real interest rate and new equilibrium level of output? What type of monetary policy did the Bank undertake? What would be the reason the bank that the Bank would undertake this type of policy? (Maximum 2 sentences)
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multiple part question Create a graph of equilibrium in the IS-LM model. Show the effect of an expansionary monetary policy. Summarize your results. B. If the central bank’s goal is to maximize output, what interest rate will we expect in equilibrium? C. Starting from the equilibrium described in (B), suppose investors experience a decrease in “animal spirits.” What happens to output? Can the central bank offset this with expansionary monetary policy? D. What could fiscal authorities do to offset the shock to animal spirits described in (C)?
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.
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."
24. A flat reduction of $ 2,500,000 in income taxes will increase disposable income by exactly $ 2,500,000. True or false 30. Congress plays an important role in monetary policy decision-making. The main role of the president is limited to appointing the members and the president of the Board of Governors. True or false 31. A common market is a group of countries that have little or no trade restrictions between them. True or false
Suppose the economy is experiencing a recession. If the Federal Reserve enacts expansionary monetary policy, interest rates will likely Multiple Choice fall causing short-run real GDP to increase. rise causing short-run real GDP to decrease. fall causing short-run real GDP to decrease. rise causing short-run real GDP to increase.
6. a. Use an MP curve and AS/AD graph to show that if the economy is hit by a large negative shock, it can go below the zero lower bound and end up in a deflationary spiral. b. What can the monetary policy authorities do to reverse the effects of the negative shock depicted in part (a)? Use an MP curve and AS/AD graph to explain.
Expansionary monetary policy is when: None of the statements are correct. The president and congress agree to lower interest rates. The president orders the Federal Reserve to cut income taxes. The Federal Reserve reduces the regulations hindering our business community. The Federal Reserve increases the nation's money and credit supply and raises interest rates. A Moving to the next question prevents changes to this answer. JUL 21 tv 11 A O COMMUNITY
Do not type in dollar signs or round any of your answers. In year one, the money supply (M) is equal to 500, the velocity of money (V) is 5, and the price level is 1.0. According to the equation of exchange, in year 1, nominal and real GDP are both equal to In year 2, the money supply is increased to 530.4 and velocity is unchanged. If the economy grew at the rate of 4 percent, real GDP in year 2 is equal to while nominal GDP in year 2 is equal to As a result of the Fed's decision to increase the money supply from 500 to 530.4, the price level rose from 1.0 to indicating that the inflation rate was percent.
After Ragnarok, output of Asgard is decreased since every god that rules the realm is dead. After his reincarnation Odin implemented expandatory fiscal policy by increasing government expenditures. Since Asgard cannot handle high interest rates and desperate for output increase, what kind of monetary policy should Vanir (gods responsible of wealth, central bank authorities of Asgard) implement? Explain and show the shifts on an IS-LM graph. (You can use the shapes option to create graphs in word.)