EBK ECONOMICS
13th Edition
ISBN: 8220106799642
Author: PARKIN
Publisher: PEARSON
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Question
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…
Chapter 31 Solutions
EBK ECONOMICS
Ch. 31.1 - Prob. 1RQCh. 31.1 - Prob. 2RQCh. 31.1 - Prob. 3RQCh. 31.1 - Prob. 4RQCh. 31.2 - Prob. 1RQCh. 31.2 - Prob. 2RQCh. 31.2 - Prob. 3RQCh. 31.3 - Prob. 1RQCh. 31.3 - Prob. 2RQCh. 31.3 - Prob. 3RQ
Ch. 31.3 - Prob. 4RQCh. 31.4 - Prob. 1RQCh. 31.4 - Prob. 2RQCh. 31.4 - Prob. 3RQCh. 31.4 - Prob. 4RQCh. 31.4 - Prob. 5RQCh. 31 - Prob. 1SPACh. 31 - Prob. 2SPACh. 31 - Prob. 3SPACh. 31 - Prob. 4SPACh. 31 - Prob. 5SPACh. 31 - Prob. 6SPACh. 31 - Prob. 7SPACh. 31 - Prob. 8SPACh. 31 - Prob. 9SPACh. 31 - Prob. 10SPACh. 31 - Prob. 11SPACh. 31 - Prob. 12SPACh. 31 - Prob. 13SPACh. 31 - Prob. 14SPACh. 31 - Prob. 15SPACh. 31 - Prob. 16APACh. 31 - Prob. 17APACh. 31 - Prob. 18APACh. 31 - Prob. 19APACh. 31 - Prob. 20APACh. 31 - Prob. 21APACh. 31 - Prob. 22APACh. 31 - Prob. 23APACh. 31 - Prob. 24APACh. 31 - Prob. 25APACh. 31 - Prob. 26APACh. 31 - Prob. 27APACh. 31 - Prob. 28APACh. 31 - Prob. 29APACh. 31 - Prob. 30APACh. 31 - Prob. 31APACh. 31 - Prob. 32APACh. 31 - Prob. 33APACh. 31 - Prob. 34APACh. 31 - Prob. 35APACh. 31 - Prob. 36APACh. 31 - Prob. 37APACh. 31 - Prob. 38APACh. 31 - Prob. 39APACh. 31 - Prob. 40APACh. 31 - Prob. 41APA
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- Which kind of monetary policy would you expect in response to recession: expansionary or contractionary? Why?arrow_forwardWhich kind of monetary policy would you expect in response to high inflation: expansionary or contractionary? Why?arrow_forwardHow does rule-based monetary policy differ from discretionary monetary policy (that is, monetary policy not based on a rule)? What are some of the arguments for each?arrow_forward
- How might each of the following factors complicate the implementation of monetary policy: long and variable lags, excess reserves, and movements in velocity?arrow_forward"Fed Chair Jerome Powell said he supports a traditional quarter-point increase in the Federal Reserve's benchmark short-term interest rate when the Fed meets later this month, rather than a larger increase that some of its policymakers have proposed." - ABC News, March 2, 2022 If the Federal Reserve increases the Federal Funds Rate this month, then which of the following is likely to happen in the US economy? Money supply will decrease and aggregate demand will decrease Money supply will increase and aggregate demand will increase Money supply will decrease and aggregate demand will increase Money supply will increase and aggregate demand will decreasearrow_forward4. July 2020, an article on reuters.com noted that: "The Fed's total balance sheet size rose.... It was largely due to continued purchase of Treasuries and mortgage- backed securities aimed at keeping financial market conditions easy." (a) Why would the Fed's buying Treasury securities and mortgage-backed securities cause the Fed's balance sheet to rise?arrow_forward
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