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What will happen to the interest rate in that nation? What will happen to the equilibrium level of investment in that nation?
Suddenly, in the year 2015, the interest rate in Wahooland rises. What are the possible reasons for this rise in interest rates in Wahooland?
Show how the change would affect supply and demand in the market for loanable funds. How would this change affect real GDP in the United States?
What is money? What is the Fed? How is the money supply measured? How do banks create money?
What is the difference between commodity money and fiat money? What are the three functions of money? Which function is the most important?
Why is the actual money multiplier usually less than the simple money multiplier? How does a commercial bank increase the money supply?
Assuming a required reserve ratio of 10%, what is the largest amount by which the money supply can increase as a result of your action?
By how much more does the money supply increase if the Fed lowers the required reserve ratio to 7%?
What is the simple money multiplier if the required reserve ratio is 15%? If it is 12.5%?
What are the tools of monetary policy? What is the effect of monetary policy in the short run? Why doesn't monetary policy always work?
How does the Fed increase and decrease the money supply through open market operations?
explain how unexpected contractionary monetary policy affects interest rates in short run. Explain changes in real GDP, the unemployment rate and price level.
Use what you learned in this chapter to explain why the monetary policy failed to restore the economy to long-run equilibrium.
What kind of fiscal policy would you recommend? Illustrate the impact of your recommendation in a fully labeled aggregate demand-aggregate supply graph.
Draw a graph showing initial equilibrium in the loanable funds market at $800 million and an interest rate of 4%.
In what circumstances would contractionary fiscal policy be recommended? How might you implement this type of policy?
How are government budget balances affected by countercyclical fiscal policy? Explain the three types of fiscal-policy lags.
Explain the difference between a debt and a deficit. Has the U.S. budget become more or less flexible as a result of the growth in the mandatory programs?
What is fiscal policy? How does the government tax? How does government spend? How do budget deficits differ from debt? What are shortcomings of fiscal policy?
Illustrate the short-run effects on the macroeconomy using the aggregate supply- aggregate demand model.
Illustrate the shortrun effects on the macroeconomy, using the aggregate supply-aggregate demand model.
Illustrate the change in the interest rate and the change to the amount of investment demand when the Fed decides to buy bonds.
Suppose the Fed buys $1 million in government bonds from a commercial bank. What effect will this action have on the bank's reserves and the money supply?
Who is harmed when inflation is less than anticipated? In what way are they harmed? Who is harmed when inflation is greater than anticipated?
Why do some students take unpaid internships when they could be working summer jobs and earning an income?