Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 33, Problem 6MCQ
To determine
To identify:
The option that correctly states the Fed's choice of
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
SUBMISSION IS DUE ON WEDNESDAY, 4th AUGUEST 2021.
EMAIL YOUR SUBMISSIONS TO: jwappiahkubi@ug.edu.gh
The commodity market for a simple economy is in equilibrium and when Y = C + 1
+ G. The money market is in equilibrium when the supply of money (M) equals
Demand for money (Md). Demand for money composes of transaction-
precautionary demand for money (Mt) and the speculative demand for money
(Ms). Assume the economy is characterised by the following information.
C = 4800 + 0.8Yd
T = 100,
| = 1900 - 75i,
G = 4000,
M = 5000,
Mt = 0.3Yd
Ms = 100 – 15i
a) Derive an expression to show the IS function
b) Derive the LM function
c) What values of Income and Interest rate provides for both the goods
market and money market equilibrium in this economy
d) Sketch the IS and LM curves for this economy.
e) Outline four factors that cause a shift in the IS curve.
Page 1 of 1
Assume that the prevailing interest rate in this economy is 6%. If the central bank decides to reduce the interest rate to 4% then:
(a)
This is contractionary monetary policy action and the price of exports would increase;
(b)
This is expansionary monetary policy and exports would increase;
(c)
This is expansionary fiscal policy and imports will increase;
(d)
This is contractionary monetary policy and imports will decrease.
find objective of policy & Monetary policy
Chapter 33 Solutions
Foundations of Economics (8th Edition)
Ch. 33 - Prob. 1SPPACh. 33 - Prob. 2SPPACh. 33 - Prob. 3SPPACh. 33 - Prob. 4SPPACh. 33 - Prob. 5SPPACh. 33 - Prob. 6SPPACh. 33 - Prob. 7SPPACh. 33 - Prob. 8SPPACh. 33 - Prob. 9SPPACh. 33 - Prob. 10SPPA
Ch. 33 - Prob. 11SPPACh. 33 - Prob. 1IAPACh. 33 - Prob. 2IAPACh. 33 - Prob. 3IAPACh. 33 - Prob. 4IAPACh. 33 - Prob. 5IAPACh. 33 - Prob. 6IAPACh. 33 - Prob. 7IAPACh. 33 - Prob. 8IAPACh. 33 - Prob. 9IAPACh. 33 - Prob. 10IAPACh. 33 - Prob. 11IAPACh. 33 - Prob. 12IAPACh. 33 - Prob. 1MCQCh. 33 - Prob. 2MCQCh. 33 - Prob. 3MCQCh. 33 - Prob. 4MCQCh. 33 - Prob. 5MCQCh. 33 - Prob. 6MCQCh. 33 - Prob. 7MCQ
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Contractionary monetary policy would ______ interest rates and _______ the U.S. dollar, leading to a(an) ________ in U.S. net exports. increase, appreciate, decrease. increase, depreciate, decrease. decrease, appreciate, increase. decrease, depreciate, increase.arrow_forwardWhen the value of the dollar falls, the price of assets rise. When the Fed injects money into the banking system increasing the money supply,_______________ the interest rates tend to increase, and stock market tends to rise. the interest rates tend to increase, and stock market tends to fall. the interest rates tend to decrease, and the stock market tends to rise. the interest rates tend to decrease, and the stock market tends to fall.arrow_forwardIf the Fed increases the money supply, in the short run interest rates will ________ and investment spending will __________. Rise; go down Decline; go down Rise; increase Decline; increasearrow_forward
- 63. Suppose Canadian real GDP is currently equal to potential GDP. Then the Canadian dollar depreciates due to the reduced demand by European producers to purchase Canadian-made raw materials. If the Bank of Canada is committed to its inflation target then it should implement an expansionary monetary policy by increasing its target for the overnight interest rate. not intervene in the economy at all since this shock will not have any real effects in the short run. implement a contractionary monetary policy by increasing its target for the overnight interest rate. implement a contractionary monetary policy by decreasing its target for the overnight interest rate. implement an expansionary monetary policy by decreasing its target for the overnight interest rate.arrow_forwardExplain the Fed's policy tools and briefly describe how each works. The Fed uses its policy tools to _______. A. regulate the amount of money circulating in the United States by printing enough money each year for the purchase of consumer goods and services B. influence the exchange rate and the country's trade balance by adjusting the interest rate C. keep the government budget debt under $20 trillion by adjusting loans to Congress D. influence the interest rate and regulate the amount of money circulating in the United States by adjusting the reserves of the banking systemarrow_forwardPredict how possible changes in monetary and/or fiscal policy may impact the supply and demand of the iPhone.arrow_forward
- Review the rubric to make sure you understand the criteria for earning your grade. Read the articles An Update on the Economy and Monetary Policy and Recent and Near-Term Fiscal Policy Write a five- to six-page paper answering the following regarding fiscal and monetary policy changes: Explain the key aspects of today’s monetary policy and how they are affecting GDP and aggregate demand/aggregate supply. Explain the key aspects of today’s fiscal policy and how they are affecting GDP and aggregate demand/aggregate supply. Are these policies being well coordinated today? In essence, are they both working in unison to address current economic conditions? Explain. What are these policies’ effects on aggregate supply and aggregate. Do understand they affect supply as well as demand. You must use a minimum of five sources for your research paper, at least three of which are scholarly. Use proper spelling, grammar, and APA formatting for your analysis paper. When you have completed your…arrow_forward2) Explain and show graphically: a) What would you expect to happen to the money demand curve during the Christmas season? b) With no Fed intervention, what would happen to the interest rates. c) In fact, interest rates do not change around Christmas due to Fed policy. How does the Fed ensure interest rates remain stable during Christmas?arrow_forwardV1arrow_forward
- Continued monetary tightening 05 October 2022 The Monetary Policy Committee today increased the Official Cash Rate (OCR) to 3.5% from 3.0%. The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment. Core consumer price inflation is too high and labour resources are scarce. Global consumer price pressures remain heightened. The global demand for goods and services is exceeding supply capacity, putting upward pressure on prices. Food and energy prices are being particularly exacerbated by the war in Ukraine. A recent decline in oil prices and an easing in some supply-chain constraints have seen headline inflation measures fall in some countries. However, core measures of inflation have risen and persist. Central banks are tightening monetary conditions, implying a weaker growth outlook for New Zealand's trading partners. In New Zealand, the level of domestic spending has…arrow_forwardContinued monetary tightening 05 October 2022 The Monetary Policy Committee today increased the Official Cash Rate (OCR) to 3.5% from 3.0%. The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment. Core consumer price inflation is too high and labour resources are scarce. Global consumer price pressures remain heightened. The global demand for goods and services is exceeding supply capacity, putting upward pressure on prices. Food and energy prices are being particularly exacerbated by the war in Ukraine. A recent decline in oil prices and an easing in some supply-chain constraints have seen headline inflation measures fall in some countries. However, core measures of inflation have risen and persist. Central banks are tightening monetary conditions, implying a weaker growth outlook for New Zealand's trading partners. In New Zealand, the level of domestic spending has…arrow_forwardContinued monetary tightening 05 October 2022 The Monetary Policy Committee today increased the Official Cash Rate (OCR) to 3.5% from 3.0%. The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment. Core consumer price inflation is too high and labour resources are scarce. Global consumer price pressures remain heightened. The global demand for goods and services is exceeding supply capacity, putting upward pressure on prices. Food and energy prices are being particularly exacerbated by the war in Ukraine. A recent decline in oil prices and an easing in some supply-chain constraints have seen headline inflation measures fall in some countries. However, core measures of inflation have risen and persist. Central banks are tightening monetary conditions, implying a weaker growth outlook for New Zealand's trading partners. In New Zealand, the level of domestic spending has…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education