EBK ECONOMICS
EBK ECONOMICS
13th Edition
ISBN: 8220106799642
Author: PARKIN
Publisher: PEARSON
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Chapter 31, Problem 41APA

(a)

To determine

Identify the economic status of September 2012.   

(b)

To determine

Identify the impacts of the Fed’s QE3 and the other stimulate activities on the economy.

(c)

To determine

Determine the risks arising from greater monetary stimulus.

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Helicopter Money​ Primer: The possible next frontier in quantitative easing      Central banks—the ​Fed, the Bank of​ Japan, the European Central​ bank, the​ People's Bank of​ China, and others—have bought trillions of dollars of bonds. The Fed alone has bought​ $4 trillion-worth.    ​Source: Daily​ FX, July​ 15, 2016   What are the​ Fed's policy tools and which policy tool did the Fed use to increase its assets to​ $4 trillion? The​ Fed's policy tools include​ ______.     A. the required reserve​ ratio, discount​ rate, and government expenditure   B. extraordinary crisis​ measures, marginal tax​ rates, and the discount rate   C. the required reserve​ ratio, discount​ rate, and open market operations   D. open market​ operations, marginal tax​ rates, and government expenditure   To increase its assets to​ $4 trillion, the Fed used​ _______.     A. a printing press to print more currency   B. required reserve ratios   C. the discount rate…
4. The hypothetical information in the following table shows what the values for real GDP and the price level will be in 2017 if the Fed does not use monetary policy. Year Potential GDP Real GDP Price level 2016 $17.7 trillion $17.7 trillion 114 2017 18.1 trillion 17.9 trillion 116 If the Fed wants to keep real GDP at its potential level in 2017, should it use an expansionary policy or a contractionary policy? Briefly explain your answer. b. Suppose the Fed's policy is successful in keeping real GDP at its potential level in 2017. State whether each of the following will be higher of lower than if the Fed had taken no action. а. I. Real GDP II. Potential GDP III. The inflation rate IV. The Unemployment rate c. Draw an AD and AS graph to illustrate your answer. Be sure your graph contains LRAS , SRAS, and AD curves for 2016 and 2017, with and without monetary policy action.
6.Fed is split over time of rate rise In October 2009, the Fed was forecasting that unemployment will average 9.8 percent in 2010 and said the federal funds rate will remain "exceptionally low" for "an extended period." But some officials were beginning to worry about unwinding the $2 trillion in special credits that have boosted the monetary base and to wonder if the interest rate might need to start rising soon. Source: The New York Times, October 9, 2009 Describe the time lags in the operation of monetary policy and explain why they pose a challenge for the Fed in deciding when to start raising the federal funds rate target in a recession. The time lag between the implementation of monetary policy and the resulting change in the inflation rate is approximately This poses a challenge for the Fed in deciding when to start raising the federal funds rate target in a recession because. А. 1 year; if the Fed raises the federal funds rate too soon, it could lengthen the recession В. a few…
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