1. Debit cards allow an individual to transfer funds directly in a checkable account to a merchant without writing a check. How is this different from the way credit cards work? Are either credit cards or debit cards money? Explain.2. How would each of the following affect the demand for money?a tax on bonds held by individualsa forecast by the Central bank that interest rates will rise sharply in the next quarter 3. Trace the impact of a sale of government bonds by the Central bank on bond prices, interest rates, investment, aggregate demand, real GDP, and the price level.4. The text notes that a 10% increase in the money supply may not increase the price level by 10% in the short run. Explain why.5. Suppose the Central bank were required to conduct monetary policy so as to hold the unemployment rate below 4%. What implications would this have for the economy?

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Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 1PA

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1. Debit cards allow an individual to transfer funds directly in a checkable account to a merchant without writing a check. How is this different from the way credit cards work? Are either credit cards or debit cards money? Explain.

2. How would each of the following affect the demand for money?

a tax on bonds held by individuals
a forecast by the Central bank that interest rates will rise sharply in the next quarter

3. Trace the impact of a sale of government bonds by the Central bank on bond prices, interest rates, investment, aggregate demand, real GDP, and the price level.

4. The text notes that a 10% increase in the money supply may not increase the price level by 10% in the short run. Explain why.

5. Suppose the Central bank were required to conduct monetary policy so as to hold the unemployment rate below 4%. What implications would this have for the economy?

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