(a) The Federal Reserve pursues an expansionary monetary policy. (b) Assume federal outlays exceed receipts when a large number of people leave the labor force to take advantage of a federal higher education grant. (c) The government decreases taxes and increases spending by a greater amount. (d) Assume that federal outlays exceed receipts by $40 billion. Unemployment falls below NRU and the government collects $65 billion more in tax revenue than expected.
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- One of the main arguments against using Fiscal Policy is the crowding out effect. Suppose the government uses government purchases to stimulate the economy. a) Explain the crowding out effect in detail using a graph for the bond market, the money market, the foreign exchange market, and the AD SRAS LRAS model. b). Explain quantitative easing? c) If the Fed’s current policy is quantitative easing, do you think that there is a danger of the government’s current fiscal policy being crowded out? Why or Why not? Explanation required for credit.Which statement is not correct? A. The primary function of the financial system is to facilitate well the flow of funds in the economy, from those who have surplus funds but can’t utilize them to those who have deficiency of funds but have productive use for the funds. B. The president and the congress sets fiscal policies that are geared towards counteracting excessive spending and borrowing during economic boom and encouraging spending during economic depression. C. Financial Institutions like banks, insurance companies and mutual funds, are entities that receive funds from savers and invest the funds in securities issued by borrowers. D. The Philippines Stock Exchange is the primary capital market of the Philippines where the debt and equity securities of publicly listed corporations are traded. E. none of the aboveThere has been concerns among businesses that the recent reductions in the NIPR has not led to significant decreases in bank lending rates. What do you think could be accounting for this? What additional measures can policy-makers undertake to reduce the Cost of borrowing in the country?
- What are two monetary policies that could be implemented by the central bank which would have the same impact as unemployment benefits? Which policy above including unemployment benefits would be most effective in boosting the economy due to a decrease in economic activityUnlike other investors, you believe the Fed is going to loosen monetary policy. What would be your recommendations about investments in the following industries?a. Gold miningb. ConstructionFor each of the following monetary policy tools:A. The BSP buys securities in the open market.B. The BSP sells foreign exchange currentC. The BSP increases the reserve requirement ratio.D. The BSP applies its moral suasion ability requesting commercial banks to lowerdown interest rates.E. The government decided to deposit funds at the BSP.1. Determine whether the monetary tool imposed by the BSP is an expansionary or acontractionary policy.
- All else being equal, if a central bank sells government bonds from the market it would: a. decrease the money supply. b. decrease interest rates. c. mean the supply of loanable funds would move to the right. d. most likely decrease savings in the economy.(a) Suppose that the economy of Microland is expanding rabidly. Due to this rapid expansion, the Federal Reserve Bank is pursuing a contractionary monetary policy. Draw clearly labeled graphs for each market (Money market, Goods Market and Investment) to show the effects of this policy on the equilibrium interest rate, investment and output. (b) Suppose that the economy of Macroland is expanding rabidly. Due to this rapid expansion, the Federal Government is pursuing a contractionary fiscal policy. Draw clearly labeled graphs for each market (Money market, Goods Market and Investment) to show the effects of this policy on the equilibrium interest rate, investment and output. Is there any crowding-out due to the contractionary fiscal policy?Say the Fed wants to increase the money supply in the country. Which of the following open market operations would be appropriate to create $12.250 in the banking system if the reserve requirement is 2%? (A) Sell $250 worth of government bonds (B) Sell $12,250 worth of government bonds (C) None of these answers (D)Buy $250 worth of government bonds (E)Buy $12,250 worth of government bonds
- Suppose expenses for Medicare and Medicaid are rising rapidly. Which strategy could the federal government use to solve this situation? Make cuts to defense and education spending, and then increase income and payroll tax rates to reduce the effect of increasing expenses in the federal government. Delay payments for the interest on the national debt and increase tax rates for payroll and corporate income taxes to raise funds for Medicare and Medicaid. Increase corporate and individual income tax rates to raise revenue, and then eliminate payments to state and local governments to cut other costs in the federal government. Increase payouts for entitlements and decrease income and payroll taxes so that consumers are provided with more money to pay for increased medical costs.When any central bank wanted to increase the money supply and loosen credit conditions, what would it do in the private market for government bonds? Explain how this is supposed to affect the economy.If the Fed buys loans from banks, what is the impact on the Loanable Funds Market? A) Decreases the supply of loanable funds and lowers the interest rate. B) Increases the supply of loanable funds and lowers the interest rate. C) Decreases the supply of loanable funds and raises the interest rate. D) Increases the supply of loanable funds and raises the interest rate.