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Microeconomics
When the Fed sells bonds, this should:
increase the Federal funds rate.
reduce the reserve requirement.
increase the discount rate.
decrease the discount rate.
Suppose excess reserves in the banking system change from $100 to $110. Other things equal, we might expect this change to:
reduce the discount rate.
reduce the Federal funds rate.
raise the reserve requirement d. reduce the prime rate.
If the Fed funds rate is 6% and Fed's target for the Fed funds rate is 4%, then the Fed is most likely to:
reduce the reserve requirement.
sell government bonds.
raise the discount rate.
raise the reserve requirement.
Suppose that investment is not very responsive to interest rates, so that a sizable increase in interest rates has only a minor effect on investment. In this case, contractionary monetary policy would:
a. have no...
reduce output slightly.
c. reduce output significantly.
d. raise output significantly.
Which of the following is a problem for the Fed?
a. Knowing what policy to use.
b. Inability to control the monetary base.
c. Budget cuts threatened by Congress.
d. Political pressure from the public.
A liquidity trap is best described as a situation in which:
a. increasing reserves does not increase the money supply.
b. lowering interest rates leads to greater bankruptcies.
c. higher interest rates crowd out private investment.
d. increases in the velocity of money raise the money supply without Fed action.
If a decrease in the money supply decreases inflationary expectations, what is likely to happen to interest rates, and why?
Interest rates will go up or remain stable, as consumers will need less incentive to save money,…
Decisions and policy changes have implications all around the globe, not just in the nation that makes these changes. Improving a nation's current account, which is a product of a depreciating dollar where investors move their money to foreign currencies and trade products, also helps to boost the legitimacy and perceived strength of an economy. In Canada, this has the effect of depreciating the currency and boosting aggregate demand, which
DQ #1. An economy's output is also its income because its output is calculated as the measurement of all the goods and services produced by the economy, and also being channeled back into the economy in the form of purchases in other economic sectors, savings, and investments. Expenditures measured in the form of GDP tally the production of goods and services on U.S. soil while GNP measures the production of