Q: Which of the following about government debt is true? it is controlled by the Federal Reserve…
A: Like most consumers, governments even have debts, which increases annually by the quantity of the…
Q: If the Federal Reserve decreased reserve requirements, then it is likely trying to accomplish which…
A: Reserve requirement is the amount of money that the central bank bound the commercial banks to hold…
Q: Distinguish between the Keynesian theory and the neoclassical theory of money demand
A: There are different types of theories of demand for money in economics as per the time period. The…
Q: If the Fed has decided to change the federal funds rate target, the main interest rate they use to…
A: The Federal Reserve System, also known as the Fed is the Central Bank of the United States. It…
Q: Suppose the actual federal funds rate is equal to the rate implied by a particular inflation goal.…
A: The central bank of the economy works towards maintaining price stability and maximum sustainable…
Q: Which of the following is NOT an example of monetary policy A. Lowering the discount rate…
A: Monetary policy is the policy which leads to change in the monetary component (interest rate) in the…
Q: Assume that a decrease in investment expenditures drives the economy falls below full employment.…
A: In Keynesian economics, the economy is said to be in equilibrium at a point where the aggregate…
Q: The Federal Reserve’s decisions are approved by Congress and the President. Group of answer choices…
A: The Federal Reserve System (FRS), also known as the Fed, is the central bank of the United States…
Q: Assume the economy is currently in Recession and the Federal Reserve has chosen to use the required…
A: When the economy is in recession it requires expansionary monetary or fiscal polices or both.
Q: Which of the following is an example of a contractionary policy? A) Raising reserve ratio B)…
A: Contractionary policy refers to those policies that are reduces the money supply in the economy.
Q: Which of the following individuals is NOT associated with the school of Modern Monetary Theory?…
A: Modern Monetary Theory or Modern Money Theory (MMT) is a heterodox macroeconomic theory that depicts…
Q: According to modern Keynesian theory, an increase in the money supply will reduce interest rates…
A: Answer: According to Keynes, the money supply is capable of influencing the output (i.e real…
Q: Which of the following best describes the uncertian consequences of the policy that the FED plans to…
A: Answer: There occurs a trade-off between inflation and unemployment in the short-run. If the fed…
Q: Why is there a lag between the Fed’s actions and the economy’s response?
A: In the behaviour of the Fed and the response of the economy, there is a time lag. The point of touch…
Q: The speculative demand for money a. will always increase proportionally to the precautionary demand…
A: There are three types of demand for money 1. Transaction demand 2. Precautionary demand 3.…
Q: What happens to the money supply when the Fed buys government bonds? According to the theory of…
A: MONEY SUPPLY Money supply refers to the volume of currency regulated in the economy during a period…
Q: When the Bank of Canada is trying to constrain monetary expansion, it often has difficulty in…
A: The money supply of an economy is expanded via expansionary monetary policy.An increase in the money…
Q: the Federal Reserve raises the discount rate, the Federal Reserve is enacting
A: Discount rate is the interest rate charged by the central bank for the loans provided by it to the…
Q: If the Fed purchases government securities, the Aggregate Demand curve shifts Answer cannot be…
A: Buying and selling of government bonds and securities by the central bank - Federal Reserve is…
Q: The Fed increases the discount rate. As a result, ceteris paribus, the equilibrium interest rate…
A: A discount rate is a tool used by the Fed as a part of monetary policy. When the discount rate is…
Q: s rate, what effects do you think those moves had on investment spending in the economy? Explain…
A: Federal interest rate is the interest rate charged by banks on lending of amounts to other…
Q: In response to the Covid-19 pandemic, the U.S. Federal Reserve has lowered the target federal funds…
A: There are different policies that are used by the government to attain the desired shifts in the…
Q: In light of the January jobs report, the anticipated Federal Reserve interest rate increases are…
A: With Unemployment rate still below the 4 % level, and the wage growth remains in tight condition,the…
Q: Assume the economy is currently in Recession and the Federal Reserve has chosen to use the required…
A: Economy is going through a recession path and Federal Reserve can able to solve the situation by…
Q: What will happen to the short run and long run prices when the Federal reserve decreases the…
A: The macroeconomic equilbrium in an economy is determined by the aggregate demand and aggregate…
Q: Which of the following statements best characterizes the Federal Reserve’s relationship to the US…
A: Central bank of a nation is the apex bank which controls and regulates the commercial banks.
Q: Calculate what the federal funds rate should be using the Taylor Rule
A: The Taylor rule (also known as Taylor's rule or Taylor principle) is an econometric model that…
Q: Keynesian economists believe that __________________. Group of answer choices A. the velocity of…
A: The theory of Keynesian economics states that the government should increase demand to improve…
Q: Which of the following is NOT a requirement in selecting a policy instrument? Question 4 options:…
A: Policy instruments refer to a link between the formulation of policy and the implementation of…
Q: The two typical liabilities on the Fed balance sheet comprise which of the following
A: The Federal Reserve System is the national bank of the United States and is answerable for the…
Q: Suppose the economy is experiencing a recession. If the Federal Reserve enacts expansionary monetary…
A: In an economy, recession refers to the situation when there is a significant fall in the economic…
Q: The former chairman of the Federal Reserve, Alan Greenspan, used the term "irrational exuberance"…
A: If the economy grows too fast, asset bubbles form which might go bust and the economy may crash.…
Q: Define the Federal Reserve Discount Rate. What is the current Federal Reserve Discount Rate?
A: Federal discount rate is interest rate initiated by central bank to control money…
Q: Which of the following would be most likely to induce the Federal Reserve to conduct expansionary…
A: Economic Plan is governing the money stock, supervising price rises/decreases, regulating the…
Q: Why does the 'Zero Lower Bound' pose a problem for the Federal Reserve?
A: Zero lower Bound means that the federal reserve has already set interest rate too low (around…
Q: How does an autonomous tightening or easing ofmonetary policy by the Fed affect the MP curve?
A: With an easing of monetary policy, some changes which are projected in monetary policy independent…
Q: Assume the economy is currently in Recession and the Federal Reserve has chosen to use the required…
A: When faced with a recession, the Federal Reserve will lower the required reserve ratio as lowering…
Q: Which of the following policy tool of the Federal Reserve was adopted in connection with the "Great…
A: Reserve requirement is the amount that the central bank sets at a fixed rate to hold as a reserve to…
Q: At their last meeting, the Fed indicated that it would begin reducing its purchases of longer-term…
A: Treasuries are government securities. These securities are for short term as well as for long term.…
Q: According to liquidity preference theory, if the price level increases, then the equilibrium…
A: The liquidity preference theory is used to determine the equilibrium interest rate in the economy…
Q: Assume the economy is currently in Recession and the Federal Reserve has chosen to use the required…
A: Given that central bank chooses required reserve policy as a tool, in times of recession, the bank…
Q: If the Fed purchases government securities, the Aggregate Demand curve shifts Answer cannot be…
A: Aggregate demand shifts when there is 1. Change in government spending 2. Change in money supply
Q: Explain in detail how policy rate affects aggregate demand through a monetary transmission…
A: Policy rate means interest rate.Interest rate changes can affect aggregate demand through monetary…
Q: Explain the logic according to liquidity preference theory by which an increase in the money supply…
A: Liquidity preference theory accepts the financing cost changes with bring the currency market into…
Q: The only one interest rate in the economy the Fed can control directly is the FFR. True False
A: Federal Fund Rates (FFR): It is the interests that the commercial banks charges to lend and borrow…
Q: r meetings in 2008 at which the Fed changed the target for the federal funds rate are shown below.…
A: In a meeting held on January 30, 2008, Federal Open Market Committee had decided to lower the Fed’s…
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- If the Fed lowers interest rates, that is an example ofDistinguish between the Keynesian theory and the neoclassical theory of money demandAccording to the Keynesian model, if the Fed wanted to reduce inflationary pressures, which of the following combinations of policies should it pursue? Group of answer choices increase the reserve requirement, increase the discount rate, and sell government securities increase the reserve requirement, increase the discount rate, and buy government securities increase the reserve requirement, decrease the discount rate, and sell government securities decrease the reserve requirement, decrease the discount rate, and buy government securities
- 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.Which of the following is an example of a contractionary policy? A) Raising reserve ratio B) Raising taxes C) Raising discount rate D) All of the aboveWhich of the following statements best characterizes the Federal Reserve’s relationship to the US economy? A. The Federal Reserve cannot affect the economy in any predictable manner. B. The Federal Reserve can control the economy with precise accuracy. C. The Federal Reserve can indirectly affect output by influencing aggregate demand. D. The Federal Reserve is required by mandate to execute the demands of Congress and the President.
- If the economy is experiencing an inflationary gap, then which of the following is a proper Federal Reserve response to close this gap? Check all that apply. Group of answer choices Buy U.S. bonds. Increase the discount rate. Increase taxes. Decrease the reserve ratio. Decrease government purchases. Sell U.S. bonds.In response to the Covid-19 pandemic, the U.S. Federal Reserve has lowered the target federal funds rate to a rate of 0.0% to 0.25% (down from 1.5% to 1.75% in February). From a monetary policy perspective, what is the goal of lowering the target federal funds rate?Define the Federal Reserve Discount Rate. What is the current Federal Reserve Discount Rate?
- The primary instrument of monetary policy for the Fed is the discount rate. True FalseExplain the liquidity puzzle and price puzzle in empirical analysis of monetary economicsWhich of the following is a tool of the Federal Reserve’s monetary policy? Group of answer choices changes in government spending on goods and services the buying or selling of government securities changes in laws that regulate commercial banks changes in tax rates of households and businesses
