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- In what ways might monetary policy be superior to fiscal policy? In what ways might it be inferior?E1 Suppose the Central Bank of Bothnia buys Treasury Bonds. What will be the impact on the price level and real GDP in the country of Bothnia? Would the purchase of treasury bonds be considered expansionary or contractionary policy AND would this be fiscal or monetary policy?1-Suppose the economy is in recession and the monetary policymakers lower interest rates in an effort tostabilize the economy.Use an aggregate supply and demand diagram to demonstrate the effects of a monetary easing when thetransmission mechanisms are functioning normally and when the transmission mechanisms are weak, suchas during a deep downturn or when significant financial frictions are present.
- 1A.) What do researchers mean when they ask “Why does monetary policy have real effects on the economy?" 1B.)Use the evidence in the table (image) to discuss the research main findings and its implications for macroeconomic policy.Explain the difference between fiscal policy and monetary policy. Explain also 2 advantages and 2 disadvantages of both policies.10. Suppose that the equilibrium real federal funds rate is 2.5% and the target inflation rateis 2.5%. If the current inflation is 6.25% and the output gap is -2.3%, use the Taylorrule to find the federal funds rate that the Fed should choose. Show your work.
- 2b The Government of Zambia has decided to pursue a dual mandate of price stability and economic growth in the conduct of monetary policy. Advise on the possibility of the country achieving both price stability and economic activity stability in the case of a temporary supply shock. Ensure to demonstrate this with the aid of the Aggregate Demand and Aggregate supply framework.14) During a period when economic growth is very strong and inflation rates are rising to uncomfortable levels, Federal Reserve policymakers might decide to pursue which type of monetary policy? 15) Which of the following pairs of terms is used to describe fluctuations in the economy? 16) During a contractionary phase of the business cycle which of the following most likely occurs? 17) Which of the following regulations prevent price gouging? 18) what does fiscal policy include?H6. How can the loan decisions of individuals and private bankers contribute to the instability in the macroeconomy (the business cycle)? Otherwise stated, how can an uncontrolled banking system destabilize the economy? Does monetary or fiscal policy have a longer time lag? Why?
- Explain and discuss contractionary fiscal policy and contractionary monetary policy with IS-LM graphs and explain its effects on consumption, aggregate demand, interest rate and prices.24)To reassure investors who were unwilling to buy mortgages in the secondary market, the U.S. Congress used two government-sponsored enterprises (GSEs) called, ________. The GSEs role was to sell bonds to investors and use the funds to purchase mortgages from _______. Select one: a. the Fed and the Treasury Department; Households b. the Fed and Treasury Department; Banks c. Fannie Mae and Freddie Mac; Households d. Fannie Mae and Freddie Mac; Banks e. Fannie Mae and Freddie Mac; Investment BanksQuestion: Suppose that a central bank pursues expansionary monetary policy by purchasing bonds. Classify each of the variables listed by the policy's short run effect upon them. * Increase - No effect- Decrease * 1. Real GDP 2. Investment spending 3. Demand for loanable funds 4. Supply of money 5. Price level 6. Marginal propensity to consume 7. The equilibrium interest rate