The Fed is expected to raise the interest rate to nearly 5% in 2023. What is the impact of this policy on inflation and stock market? a. Inflation increases and stock prices increase b. Inflation increases and stock prices decrease a. Inflation decreases and stock prices increase b. Inflation decreases and stock prices decrease

The Fed is expected to raise the interest rate to nearly 5% in 2023. What is the impact of this policy on inflation and stock market? a. Inflation increases and stock prices increase b. Inflation increases and stock prices decrease a. Inflation decreases and stock prices increase b. Inflation decreases and stock prices decrease

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter16: Budget Deficits In The Short And Long Run

Section: Chapter Questions

Problem 3DQ

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If the Fed increases the money supply, A. the interest rate increases, which tends to reduce stock prices. B. the interest rate decreases, which tends to raise stock prices. C. the interest rate decreases, which tends to reduce stock prices. D. the interest rate increases, which tends to raise stock prices.
The Fed increases the discount rate. As a result, ceteris paribus, the equilibrium interest rate will: a) not change b) decrease c) be ambiguous d) increase
What happens when the Fed begins to taper purchases? (a) The supply of bonds increases, price rises and interest rates rise (b)Demand for bonds decreases, prices fall, and interest rates rise (c) The supply of bonds decreased, prices fall, and interest rates rise
In 2004 the Fed began raising interest rates? What is likely to happen to the price level and real GDP as a result? Select one: a. The price level and real GDP will both increase b. The price level and real GDP will both decrease c. The price level will increase, but real GDP will decrease d. The price level will decrease, but real GDP will increase e. Interest rates have no effect on economic growth and inflation
In the graph you've just explored, if the Fed lowers the federal funds rate target range to 1.75 to 2.00 percent and conducts QE of $1 trillion, has the Fed done too little, too much, or got it just right to achieve full employment? A. Just right B. Too much C. Too little
B. induces households to increase consumption. C. increases aggregate demand for goods and services. D. All of the above are correct. How would the Fed use open market operations (OMO) to raise interest rates? A. The Fed sells bonds to banks. B. The Fed buys bonds from banks. C. The Fed reduces the discount rate. D. The Fed sells gold certificates.
The Fed believes if inflation is high and GDP is high, unemployment is likely to: a. Increase b. Decrease c. Remain the same d. Invert
Suppose the Fed decides to implement expansionary monetary policy. This will likely result in a _____ in the money supply and a _____ in interest rates. increase or decrease?
Suppose there is an increase in money demand because of a stock market boom that raises people’s wealth. Draw the money market model to show the stock market boom impact on the interest rate. Will investment and consumption increase or decrease because of this event? What should Fed do if it wants to maintain the original interest rate? Show the impact of the Fed’s action in the graph of part a. Will investment and consumption still change if the Fed takes its action?
When the Fed increases the money supply, we expect a. interest rates and stock prices to rise. b. interest rates to fall and stock prices to rise. c. interest rates to rise and stock prices to fall. d. interest rates and stock prices to fall.
In 2012, the Fed announce a large-scale program for buying bonds. This bond buying program should lead to ____ US Interest rates and a(n)____ of the US dollar. A. higher, depreciation B. lower, depreciation C. higher, appreciation D. lower, appreciation
The NBER says the economy went from a peak in December 2007 to a trough in June 2009, until hitting a peak in the fourth quarter of 2019, then a trough in April 2020, and improving since then. Given this description of the dates of the business cycle, does the Fed’s policy of changing the discount rate make sense? Why or why not? Only typed answer and don't use chat gpt to solve the problem