After the press conference that followed the Federal Open Market Committee meeting on June 19, 2013, there were reports in the media that Chairman Bernanke's comments were a signal that the Fed would raise interest rates sooner than expected. As a result, the yield on 10-year U.S. Treasury notes rose to almost 2.6%, the highest level since August 2011. a) Comment on how this would affect the IS curve.

After the press conference that followed the Federal Open Market Committee meeting on June 19, 2013, there were reports in the media that Chairman Bernanke's comments were a signal that the Fed would raise interest rates sooner than expected. As a result, the yield on 10-year U.S. Treasury notes rose to almost 2.6%, the highest level since August 2011. a) Comment on how this would affect the IS curve.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter27: Issues In Macroeconomic Theory And Policy

Section: Chapter Questions

Problem 10P

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Similar questions

Explain why the IS curve is downward sloping in the interest rate-output space.
Suppose the law changes and the corporate income tax rate has been cut in half. As a result, corporations decide to purchase new buildings and equipment. As a result we can expect a shift in the [ Select ] supply of or demand for funds curve and as a result the equilibrium interest rate will [ Select ] increase or decrease .
Suppose the Federal Reserve (the Fed) announces that it is lowering its target interest rate by 75 basis points, or 0.75%. It would achieve this by ______the ________. Use the green line (triangle symbols) on the preceding graph to illustrate the effects of this policy. Place the black point (plus symbol) on the graph to indicate the new equilibrium interest rate and quantity of money. The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows: Because there is__________money in the financial system, there is an excess _________ money at the initial equilibrium interest rate. Individuals and businesses adjust their asset portfolios by _______bonds. As a result, the price of bonds_________ , and the interest rate______ . This process continues until the new equilibrium interest rate is achieved.
Explain what effect a reduction in the future expected interest rate will have on the IS curve and M curve in the current period.
By using graphs, show and explain each of the following events as either leading to an increase or a decrease in the equilibrium interest rate? d)A sale of government securities by the TCMB f)An increase in the discount rate e)decrease in the level of aggregate output
Suppose the economy is experiencing a recession. If the Federal Reserve enacts expansionary monetary policy, interest rates will likely Multiple Choice rise causing investment to increase. fall causing investment to increase. fall causing investment to decrease. rise causing investment to decrease.
If Central Bank buys security bills in the open market; then what happens to equilibrium interest and equilibrium output under the following conditions?Sketch graph for each condition and explain your answer. a) When interest elasticity of investment is low b) When interest elasticity of investment is high c) When interest elasticity of investment is zero
Suppose that money demand is given by the function MD=55+P, and the Bank of Canada maintains the supply of money at MS=$58b. If the Bank of Canada suddenly increases the money supply to MS'-$60b, what has happened to equilibrium value of money? a)It has decreased from 5 to 2 b)MD will shift, and the value of money will remain unchanged c)It has increased from 3 to 5 d) It has decreased from 1/3 to 1/5
What are called Z factors? Explain how does a change in any of the Z factors lead to a change in interest rate, an instrument of monetary policy?
What effect will a sudden increase in the volatility of gold prices have on interest rates? Explain your answer with a graph.
When the Federal Reserve reduces its policy interestrate, how, if at all, is the IS curve affected? Brieflyexplain
The Federal Reserve publication that discusses forecasts for the economy is known as the