Assignment:
- If the Fed cuts the quantity of money, explain how each of the following items change.
a) Business' purchases of new capital equipment.
b) Households' purchases of new cars and houses.
c) Foreign purchases of U.S.-made goods and services.
d) Americans' purchases of Canadian-made goods and services.
- What is the multiplier effect of monetary policy?
- How does it work?
- How does the size of the expenditure multiplier influence the size of the multiplier effect of monetary policy?