5. Identify one monetary policy option this country’s central bank has to push the economy towards full employment output, and draw a money market graph showing the effect of this policy. 6. Identify the change in nominal interest rate, and explain how this change would affect Aggregate Demand.
Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and
- The following is the balance sheet for Garrett Bank, one of many commercial banks in a country. Assume a 10 percent reserve requirement.
ASSETS | LIABILITIES |
Reserves – $5,000 | |
Business Loans – $10,000 | Equity – $5,000 |
Student Loans – $8,000 | |
Government Loans – $2,000 | |
TOTAL ASSETS – $25,000 | TOTAL LIABILITIES – $25,000 |
2. Calculate Garrett Bank’s
3. Assuming that Garrett Bank and other banks now lend out all
4. Assume that the country’s actual output is less than full employment output. Draw an AD/AS model, labelling current output , Y1, and full-employment output, Ye.
5. Identify one
6. Identify the change in nominal interest rate, and explain how this change would affect Aggregate Demand.
Please solve question 5 and 6. Thank you.
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