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- The multiplier is an indication of the capacity of money injected in the economy to a. increase investment b. increase welfare c. increase consumption d. increase interest rate e. increase GDPOther things equal, an expansionary monetary policy will shift the economy's aggregate demand curve to the right. True or FalseIf the central bank desired to increase spending in the economy, using the instruments ofmonetary policy, explain how the central bank can indirectly achieve this?
- What is an open market operation? How can a central bank adopt an openmarket operation to increase the growth rate of her money supply? Usingrelevant Classical Theories, explain the long run effects on the inflation rateand nominal interest rate.Consider an economy described by the following equations. Y= C + I + GC= 100 + .75 (Y - T)I= 500 - 50rG= 125T= 100 Where: Y is GDP, C is consumption, I is investment, G is government spending, T is taxes and r is the rate of interest. Answer the questions based on the following equations above. a. What is the value of the multiplier? b. What is the equilibrium equation for Y? Show your solution. c. Suppose the Central Bank policy is to adjust the money supply to maintain the interest rate at 4 percent, so r=4. What is the value of output? Show your solution. d. Assuming that no change in fiscal policy, what is the effect of a reduction in interest rate from 4 percent to 3 percent on equilibrium output. Show your solution. e. In this case, explain the policy that was used by the policymaker to target the aggregate demand.How does restrictive monetary policy affect the level of investment and consumption? Explain your answer by using the IS/LM model
- Expansionary policy is intended to boost business investment and consumer spending by injecting money into the economy through direct government deficit spending or increased lending to businesses and consumers. For example, tax cuts and increased government spending. At the same time, expansionary monetary policy is when a central bank uses its tools to stimulate the economy. For instance, it increases the money supply, lowers interest rates, and increases demand. Only typed AnswerQ15 Which of the following statements is consistent with a given (i.e., fixed) LM curve? Select one: a. A reduction in the interest rate causes money demand to decrease. b. A reduction in the interest rate causes investment spending to increase. c. An increase in output causes an increase in demand for goods d. An increase in output causes an increase in money demand.Consider an economy described by the following equations. Y=C+I+G C=100+.75(Y−T) I=500−50r G=125 T=100 Where: Y is GDP, C is consumption, I is investment, G is government spending, T is taxes and r is the rate of interest. Questions: a. Suppose the Central Bank policy is to adjust the money supply to maintain the interest rate at 4 percent, so r=4. What is the value of output? Show your solution. b. Assuming that no change in fiscal policy, what is the effect of a reduction in interest rate from 4 percent to 3 percent on equilibrium output. Show your solution. c. In this case, explain the policy that was used by the policymaker to target the aggregate demand.
- Describe the policy mix that would result in each of the follow-ing situations.a. The interest rate decreases, investment increases, and thechange in aggregate output is indeterminate.b. Aggregate output increases, and the interest rate change isindeterminate.c. The interest rate increases, investment decreases, and thechange in aggregate output is indeterminate.d. Aggregate output decreases, and the interest rate changeis indeterminate.What is the Deutsche Bank strategy to Shift More UK Assets after Brexit?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.