Which of the following pairs of events will definitely lead to a decrease in the equilibrium interest rate? Select one: O a. sale of government securities and a decrease in the price level (P) O b. a decrease in the required reserve ratio and a decrease in nominal aggregate output (Y) O c. purchase of government securities and an increase in nominal aggregate output (Y) O d. an increase in the discount rate and an increase in the price level (P)

Which of the following pairs of events will definitely lead to a decrease in the equilibrium interest rate? Select one: O a. sale of government securities and a decrease in the price level (P) O b. a decrease in the required reserve ratio and a decrease in nominal aggregate output (Y) O c. purchase of government securities and an increase in nominal aggregate output (Y) O d. an increase in the discount rate and an increase in the price level (P)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Need help C)You are given the following information :Money demand for transaction (Md t) = 0.2YMoney demand for speculation (Md s/P) = 500 – 5,000rMoney supply (Ms) = 2,500Price level (P) = 2Income level (Y) = 10,000where r represents the rate of interest. Based on the above information, i) Calculate the equilibrium levels of interest rate and quantity of moneyii)If the interest rate is fixed at 0.1, what is the quantity of money demanded and supplied.iii)Demonstrate your answers to parts (d)(i) and (d)(ii) in an appropriate diagram.
2. Create the T-entry for the Fed that goes together with the choice in the question above
QUESTION 1 MV = PQ M = 200,000 V = 5 Q = 10,000 P = 100 01. Given the above model, what will happen if the amount of money in circulation decreases to 100,000 (as a result of a collapse of the banking system)? O a) Output level will increase to 15,000 QUESTION 2 Ob) Output level will remain unchanged O c) Output level will decrease to 5,000 O d) None of the above. MV = PQ V=2 Q = 1000 P = 1 QUESTION 3 (Quantity of Money in circulation) x (Velocity of money) = (Price) x (Real output) Velocity is equal to 2 and is constant (Quantity of Money in circulation) x (Velocity of money) = (Price) x (Real output) Quantity of money in circulation is 200,000 Velocity is equal to 5 and is constant Output is equal to 1000 and the economy is at full employment Price is equal to 1 and is VARIABLE 02. Given the above model, what will happen to the price if the central bank increases quantity of money in circulation from 500 to 1000? O a) Price will decrease from 1 to 1/2 Ob) Price will increase from 1…
Identity the effect of on either demand or supply curve and the equilibrium interest rates on:- Increase in tax Recession in the economy Decrease in bank rates Surplus budget.
Using the simple monetary rule Rt-r=m(T-), if m=0.5 and the inflation rate is 2 percent below the target inflation rate, the Federal Reserve will A. raise the marginal product of capital by 1 percent. B. lower the interest rate by 1 percent. O C. raise the interest rate by 1 percent. OD. lower the marginal product of capital by 1 percent. O E. lower the target rate by 2 percent.
Suppose the economy is initially in long-run equilibrium. The Fed decides to increase the required reserve ratio. In the short-run, this contractionary monetary policy will cause: O A. A shift from SRAS₂ to SRAS, and a movement to point B, with a lower price level and higher output. OB. A shift from AD₁ to AD₂ and a movement to point B, with a higher price level and higher output. O C. A shift from SRAS, to SRAS₂ and a movement to point A, with a higher price level and the same output. O D. A shift from AD₂ to AD, and a movement to point D, with a lower price level and lower output. 122 120- 118- 116- 114- 112- 110- 108- 106- 104- 102- 100- 98- 96- 94- 92- 90- -O 0 Price Level LRAS B 4 6 8 10 12 Real GDP (trillions of 2000 dollars) SRAS₂ SRAS₁ AD2 AD1 14 16
During 2001-2004, the Fed injected additional reserves into the banking system, which reduced the federal funds rate and other short-term interest rates. Other things constant, what is the most likely short-run impact of this policy? an increase in the rate of unemployment O a reduction in the growth of employment an increase in aggregate demand and real GDP O a reduction in the long-run rate of inflation
3.Consider an independently run hotel in Krems and briefly discuss how it might be affected by the following scenarios: a) A rise in interest rates b) A fall in unemployment c) A fall in the exchange rate (i.e., the value of the euro decreases) d) A rise in inflation
7. Consider the money market. Suppose the U.S. economy begins to boom and aggregate output increases. Describe the effect on the interest rate if the Federal Reserve decides to increase the money supply at the same time that aggregate output increases.
The interest rate commonly used by banks to borrow from each other outside the US, which is also used for revolving loans inside the US, is the O REPO O IEURO O LOREN O LIBOR
D4
I advise you to graph this problem. If u=3% and u*=6%, Central bank that uses interest rates should target interest rate. This will result in LY and P. a. None of the answers offered are accurate. O b. increase; lower; higher O c. reduce; lower; lower O d. reduce; higher; higher O e. increase; lower; lower