1. Consider the stabilization policy. In the cases of events below, answer how the event would change Y and how central bank should change the money supply as the stabilization policy. Either Decrease or Increase. In both cases below, Home economy was initially in the long-run equilibrium. 1.a. Foreign demand for Home output rose. Change in Y: Stabilization policy: 1.b. The investment fell. Change in Y: Stabilization policy

1. Consider the stabilization policy. In the cases of events below, answer how the event would change Y and how central bank should change the money supply as the stabilization policy. Either Decrease or Increase. In both cases below, Home economy was initially in the long-run equilibrium. 1.a. Foreign demand for Home output rose. Change in Y: Stabilization policy: 1.b. The investment fell. Change in Y: Stabilization policy

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter32: Macroeconomic Policy Around The World

Section: Chapter Questions

Problem 9SCQ: Show, using the AD/AS model, how governments can use monetary policy to decrease the price level.

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Similar questions

A. Draw the baseline long run steady state equilibrium. Suppose this equilibrium existed in September of 2021 B. Suppose the Federal Reserve undertakes expansionary monetary policies after September of 2021. What will happen to the output, employment and price level in the economy in December 2021 (assuming that monetary policies take a few months to show results) ? How will you change your graph in response (you need to show a shift of some curve)? C. Will you let market adjustment work? Show on the graph how market adjustment will affect the economy in May 2022 compared to where the economy was in December 2021?
Interest rate Central bankers in Widgetsa have decided that inflation is too high and contractionary monetary policy is needed. First, position LRAS where it would be if contractionary policy is needed. Then, show the short-run results of this policy action by shifting the appropriate curves on the graphs. Quantity of loanable funds Demand LRAS Supply Price level Select all of the actions that are contractionary policy choices the central bankers could use. increase taxes sell bonds to banks decrease government spending raise the interest rate for last-resort loans decrease reserve requirements Real GDP AD SRAS
In the short run, expansionary monetary or fiscal policy is expected to O increase; decrease. inflation and output. increase; increase. decrease; decrease. O decrease; increase.
Show, using the AD/AS model, how governments can use monetary policy to decrease the price level.
Scenario FROQ In 2019 the federal government decreased interest rates for banks three times. Shortly after, POTUS tweeted the following Would be so00 great if the FED would further lower interest rates and quantitative ease. The Dollar is very strong against other currencies and there is almost no inflation. This is the time to do it. Exports would zoom! December 17, 2019 A. Define the type of economic policy inferred by scenario and describe how it impacts the economy. B. Describe why POTUS has no power to control the implied power inferred to by the scenario above. C. Describe how a change in political party leadership could effect the outlined scenario above.
18. Which of the following policies is not classed as a stabilization policy? 4) A policy aimed at reducing unemployment. b) A policy aimed at reducing the number of people in poverty. C) A policy aimed at reducing the rate of inflation. d) A policy aimed at shifting the production possibility frontier outwards. 19. Which of the following statements is a positive statement? a) Bankers' bonuses should be taxed. D) The eurozone ought to allow member countries in difficulty to stop using the euro and use currencies of their own instead. c) One of the largest industries in the UK is the financial services industry. d) The UK government ought to split up some of the largest UK banks to promote more competition in the banking industry. 20. Suppose you buy Economics book by Abigail Padi. What is the opportunity cost of your purchase? a) The money you paid for the book. b) Whatever you would have spent the money on if you had not bought the book. c) The cost of producing the book. d) The time…
Which of these is True? O. The world credit-money supply was hugely contracted before the crash, which is why homes were so expensive O. Central Banks create 'Base Money O. Central Banks create all the money supply O. The collapse of hte dollar is the reason the US housing market was flooded with loanable funds O. Central Banks promoted speculation (perhaps unwittingly with their tight money policy in the years of the pre 2008 bubble O. Private banks only pass on deposits when they make loans 8. Private banks create money. O. True O. False
What is the ideal balance between monetary and fiscal policy for a nation like Japan, where prices are rising yet unemployment is under control? a. Decrease taxes, increase government spending and increase money supply b. Decrease taxes, decrease government spending and decrease money supplyc. None of these choice is correctd. Increase taxes, decrease government spending and decrease money supply
Countries like China and other developed economies are in the Neo classical zone. What is the best option for these countries to sustain their economies? a. Move back to intermediate zone O b. Decrease aggregate demand c. Move back to Keynesian Zone d. Increase aggregate supply
Price stability: Suppose you are the head of the central bank and your mandateis to maintain the price level at a constant value. Explain what you would doto the money supply in response to each of the following events:(a) Real GDP increases by 4% during a boom.(b) Real GDP declines by 1% during a recession.(c) Real GDP is growing at 3% per year.(d) Te velocity of money increases by 2%.(e) Te velocity of money declines by 1%.
Q3. Monetary and fiscal policy to manage the economy and growth The small industrial economy of Belgand wants to have FEWPS (full-employment with price stability). The economy has the following characteristics (millions of Belgmarks) "i" denoted interest rate. The equilibrium output is currently: Ya* Marginal propensity to consume Asset Demand Interest-determined 8000 for Money part of desired investment %3D I(i) | 100 | 200 250 Md 160 i MPC = 0.8 12 12 Full employment level of output (Potential GDP) Yp The money supply is 520. Banks must keep a 12.5% required reserve ratio (RR) against deposits. No ENcess reserves. 11 240 11 7000 10 320 10 222 0.125 8. 9. 400 9. 300 440 8. 350 480 400 6. 520 6 500 Interest-determined part of investment "I(i)" and the demand for money are shown to the right. The money supply is defined as "demand deposits" (ignore transaction demand). 1) Sketch and label economic conditions on graph. 2) Calculate the multiplier and the income and Aggregate expenditure…
b. How do fiscal and monetary policies differ in their approaches to managing the economy during periods of recession? Provide examples of each policy tool.