Explain how the central banks are able to reduce the level of aggregate demand in an economy by changing the reserve requirements of commercial banks? (4)
Q: 24. Which of these consumer activities is most influenced by the Federal Reserve? E. applying for a…
A: The Federal reserve system provides banking services for financial institutions as it is the central…
Q: . Which of the following is not a way that the United States government attempts to control the…
A: Economic growth and inflation Economic growth refers to a throughout a period of time, a rise in the…
Q: (19) Assume that the economy begins in long-run equilibrium and that the federal reserve decides to…
A: If an economy begins in long-run equilibrium and that the federal reserve decides to use open market…
Q: Monetary policy refers to actions by a central bank to control the supply of money and interest…
A: Financial markets are those markets where securities of different companies float. Securities mean…
Q: 12. As the outstanding debt of a nation becomes very large relative to the size of the economy,…
A: The correct statement is “As the outstanding debt of a nation becomes very large relative to the…
Q: the Reserve Bank increases the quantity of monetary base, then: the cash rate falls —…
A: Reserve bank is the central bank of the country that controls money supply.
Q: Question 4. Suppose that the bank of Canada uses money to buy bonds in financial markets during a…
A: GIVEN Suppose that the bank of Canada uses money to buy bonds in financial markets during a…
Q: What is an implication of the neutrality of money in the long run? The economy's level of…
A: The neutrality of money theory is predicated on the concept that money may be a “neutral” factor…
Q: The following excerpt is taken from the Ministry of Finance: Statement on the economic effects and…
A: We are authorized to answer three subparts at a time, since you have not mentioned which part you…
Q: The following excerpt is taken from the Ministry of Finance: Statement on the economic effects and…
A: Aggregate demand is the sum of consumption spending, investment spending, government spending, and…
Q: Explain detail. 1. Suppose investors change expectations and perceive Treasury securities to be…
A: Several factors affect the demand and supply of commodities (including financial commodities). A…
Q: 14. During a period when economic growth is very strong and inflation rates are rising to…
A: Since you have asked multiple questions, we will solve first question for you . If you want any…
Q: The IS curve represents A. the single level of output where the goods market is in equilibrium. B.…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: * 9. What is the difference between monetary policy and fiscal policy? A-The tool used by the…
A: Policy measures whether used by government or central bank have motive to stabilize the economy .
Q: 13. The Transmission Mechanism This problem looks at typical transmission mechanisms as a result of…
A: The central bank can take several measures in order to control the economy. There are various tools…
Q: Assume prices and wages are flexible. That is, they will change substantially in the short-run. What…
A: Selling bonds reduces the money supply in the economy. The lower money supply results in a higher…
Q: 4. Why did inflation targets replace monetary targets as the most widely used strategy for monetary…
A: Inflation targeting is a monetary strategy in which monetary policy is adjusted to achieve a set…
Q: Assume that the Saudi economy is in a recession and SAMA decides to implement an expansionary…
A: The monetary policies are those policies which are enacted by the central bank of a country to…
Q: 1-Suppose the economy is in recession and the monetary policymakers lower interest rates in an…
A: When the economy is in recession all the economic activity of supply and demand side is not…
Q: 1) Which of the following actions can the Federal Reserve take to reduce inflationary pressures in…
A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: The borrowing from the central bank by the government leads to inflation as it increases the supply…
A: Debt monetization is the process when the government borrows from the central bank in order to…
Q: True or False 1) Starting from equilibrium in the money market, suppose the money supply increases.…
A: In the above diagram, when the supply of money increases from Ms to MS". This leads to a rise in the…
Q: Identity the effect of on either demand or supply curve and the equilibrium interest rates on:-…
A: In an economy, any change in economic variables have a direct impact on demand or supply of output,…
Q: The Government of Zambia has decided to pursue a dual mandate of price stability and economic growth…
A: A supply shock occurs when the availability of a product changes and its price rises or falls in…
Q: Suppose the Federal Reserve wants to stimulate the economy, thereby increasing GDP. Which of the…
A: Federal Bank is the economy is the central bank of the country, they imply rules and regulations…
Q: Assuming that prices of various consumer goods increase in the country. This event will…
A: Money market refers to the financial market in which currencies or liquid assets are traded. It…
Q: 23. If the interest rate on a loan a business is looking to take is lower than the expected return…
A: Hi! Thank you for the question. As per the honor code, We’ll answer the first question since the…
Q: . Explain how the involved countries in the Asian Financial crisis 1997 recovered their economic…
A: Asian Financial crisis 1997: It refers to the crisis under which many Asian countries got affected.…
Q: What are the two components of the Fed's dual mandate? A. Interest rate stability and foreign…
A: The answer is D) price stability and interest rates stability
Q: Assume that the following data characterize a hypothetical economy: money supply = $100 billion;…
A: a) Here, the money supply is $100 billion and money demand is $55 billion, but adds $20 billion for…
Q: Suppose the economy is in recession and asymmetric information problems increase, using a graph of…
A: A recession is a macroeconomic term that denotes a significant drop in overall economic activity in…
Q: 32 - What happens as a result of aggregate demand and aggregate supply if the money supply…
A: A fall in the money supply leads to a fall in the lending capacity of the banks. This leads to a…
Q: 6. a) If US money supply in the beginning of the year is $1148 billion. Suppose the Fed Bank has…
A: Reserve ratio: It can effect the supply of money , that is supply of money will be affected by the…
Q: 7. Suppose the central bank expands the money supply, but because the public expects this action, it…
A: The Central Bank expands the money supply ,but because the public expects this action ,it…
Q: Explain how the central banks are able to reduce the level of aggregate demand in an economy by…
A: The central bank has the ability to influence aggregate demand in the market by changing the level…
Q: When the Fed decreases the discount rate, banks will a borrow more from the Fed and lend less to…
A: Discount rate, in economics, is the rate charged by the Fed to the commercial banks when these banks…
Q: 20) Suppose that the central bank must follow a rule that requires it to increase the money supply…
A: When the central banks increase the money supply during falling prices (deflation) and decrease the…
Q: Suppose banks keep no excess reserves and no individuals or firms hold on to cash . If someone…
A: Simple money multiplier = 1/rrr rrr= required reserves ratio = 0.05 Simple money multiplier =…
Q: 4. Policy issues . Suppose an economy exhibits a large unexpected decrease in productivity growth…
A: The economies goes through various phases of expansion, and contraction, where the policy makers…
Q: Which of the following can be categorized under fiscal policy? a. Decrease in money supply b.…
A: The policy in which tax policies and government spendings are used to make an impact on the economic…
Q: Question 3: Suppose that we have the following equations for the output gap and inflation in a…
A: Given Output gap equation Y^=-0.5*(i-πe-0.02)π=πe+Y^
Q: D4) explain the loss function of central banks and how monetary policy can be implemented to cope…
A: A financial crisis is any of a number of scenarios in which the nominal value of some financial…
- Explain how the central banks are able to reduce the level of aggregate demand in an
economy by changing the reserve requirements of commercial banks? (4)
Step by step
Solved in 2 steps
- D4) explain the loss function of central banks and how monetary policy can be implemented to cope with financial crises.Why is it important for the central bank of a country to be independent? (i) The central bank needs to be free from political pressures. (ii) Research has shown that inflation tends to be lower where central banks have greater independence. (iii) The central bank needs to ensure that it has the freedom to set the federal funds rate at one fixed level. (iv) The central bank needs to ensure that the Federal Reserve governor never has to testify before Congress. (i) and (ii) (ii) and (iv) (ii) and (iii) O (i), (iii), and (iv)Is it preferable for central banks to primarily target inflation or unemployment? Why?
- Explain how the central banks are able to reduce the level of aggregate demand in an economy by changing the reserve requirements of commercial banks?Which of the following laws suggests that attempts by a central bank to regulate the level of lending by banks imposing certain controls can be circumvented by the banks searching alternatives out of the regulatory preview'? (a) Flag of Convenience Law (b) Swiss Syndrome Law (c) Goodhart's Law (d) Okun's Law23) Which of the following legislation says the Federal Reserve should promote price stability and maximum employment, but does not specify how the Federal Reserve should weight these goals? the Clayton Antitrust Act of 1914 There is no such legislation affecting the Federal Reserve. the Federal Reserve Act of 1913 a 1977 amendment to the Federal Reserve Act.
- 128.) The Federal Reserve is considered a powerful institution because it has the power to: Act as a lender of last resort, control money supply in the long term, and print money. Create money, buy government bonds, and control long-term economic growth. Buy government bonds, act as a lender of last resort, and create money. Print money, tax, and control long-term growthBanking began as a mostly private (non-government) industry and, over time, the government's role became primarily one of regulation (e.g., setting reserve requirements) and providing support for private banks (e.g., central banks lending banks money to pay deposits). Is this balance of responsibilities good? Should the government be less involved in banking, or should the government expand its role in banking by taking deposits from and making loans directly to individuals and businesses (like most banks do today).b) Explain the type of monetary policy used by central banks to overcome global recession.
- Discuss four (4) pitfalls of monetary policya) How do financial institutions benefit the overall economy? b) How do Fls reduce monitoring costs associated with the flow of funds from fund suppliers to fund investors? c) What is the Basel Agreement?Expansionary policy is intended to boost business investment and consumer spending by injecting money into the economy through direct government deficit spending or increased lending to businesses and consumers. For example, tax cuts and increased government spending. At the same time, expansionary monetary policy is when a central bank uses its tools to stimulate the economy. For instance, it increases the money supply, lowers interest rates, and increases demand. Only typed Answer