EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 9780134516196
Author: BADE
Publisher: PEARSON CO
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Chapter 33, Problem 4MCQ
To determine
To identify:
The option that correctly states the policy that FED inculcates as a strategy to control inflation.
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The Fed uses monetary policy to affect the supply and demand for money. The monetary policy affects interest rates, aggregate spending, and economic growth. How does the Fed’s policies have the power to prevent recessions. Should the Fed intervene to prevent recessions?
When the Fed lowers the federal funds rate target and buys bonds, what happens to short-term interest rates and the monetary base?
A. short-term interest rates fall; the monetary base increases
B. short-term interest rates fall; the monetary base decreases
C. short-term interest rates rise; the monetary base increases
D. short-term interest rates rise; the monetary base decreases
When the Fed sells bonds, the amount of money in circulation in the economy_______ . This drives interest rates_________ , which causes businesses to invest________ in capital improvements such as new factories and upgraded equipment. The result is_________ in aggregate demand,________ in the equilibrium price level, and______ in the equilibrium level of real GDP.
Chapter 33 Solutions
EBK FOUNDATIONS OF ECONOMICS
Ch. 33 - Prob. 1SPPACh. 33 - Prob. 2SPPACh. 33 - Prob. 3SPPACh. 33 - Prob. 4SPPACh. 33 - Prob. 5SPPACh. 33 - Prob. 6SPPACh. 33 - Prob. 7SPPACh. 33 - Prob. 8SPPACh. 33 - Prob. 9SPPACh. 33 - Prob. 10SPPA
Ch. 33 - Prob. 11SPPACh. 33 - Prob. 1IAPACh. 33 - Prob. 2IAPACh. 33 - Prob. 3IAPACh. 33 - Prob. 4IAPACh. 33 - Prob. 5IAPACh. 33 - Prob. 6IAPACh. 33 - Prob. 7IAPACh. 33 - Prob. 8IAPACh. 33 - Prob. 9IAPACh. 33 - Prob. 10IAPACh. 33 - Prob. 11IAPACh. 33 - Prob. 12IAPACh. 33 - Prob. 1MCQCh. 33 - Prob. 2MCQCh. 33 - Prob. 3MCQCh. 33 - Prob. 4MCQCh. 33 - Prob. 5MCQCh. 33 - Prob. 6MCQCh. 33 - Prob. 7MCQ
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- If the Fed increases the money supply, in the short run interest rates will ________ and investment spending will __________. Rise; go down Decline; go down Rise; increase Decline; increasearrow_forwardWhat happen to the money market equilibrium when the Fed raises its interest rate target to 6 percent a year following the increase in real GDP? The interest rate _______ and the equilibrium quantity of money _______. A. remains at 5 percent; increases B. rises to between 5 and 6 percent; decreases C. rises from 5 to 6 percent; decreases D. rises from 5 to 6 percent; might increase, decrease, or not changearrow_forwardState whether you agree or disagree with the following statement: Explain what happens to Money Demand and Interest Rates Inflation, a rise in the price level, causes the demand for money to decline. Because inflation causes money to be worth less households desire to hold less of it. Options to choose from = Disagree, Agree, Increase, Decrease, Remain Unchanged Agree or Disagree ________ Impact on Money Demand________ Impact on Interest Rate _________arrow_forward
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