Use the market for central bank money to answer this question. Graphically illustrate and explain what effect a Federal Reserve purchase of bonds will have on this market and on the equilibrium interest rate
What will be an ideal response?
A Fed purchase of bonds will cause an increase in the supply of central bank money. To restore equilibrium in this market, the interest rate will have to fall. As it does, the quantity demanded for central bank money will rise and, therefore, restore equilibrium.
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The expenditure multiplier equals 5 and there is a $3 million increase in investment. Equilibrium expenditure
A) increases by $5 million. B) increases by $0.60 million. C) increases by $15 million. D) decreases by $15 million. E) increases by $3 million.
What occurred during the Free Banking Era?
a. Currency varied widely from state to state. b. Repaying of loans was not closely monitored. c. The Second Bank of the United States was established. d. The dollar bill was introduced.
In 2012 the public debt was $16.4 trillion. Put this number in perspective by relating the debt to GDP, to other countries’ debt, to the amount of interest payments on the debt, and to ownership of the debt.
What will be an ideal response?
Financial intermediaries are important because
A) they bring lenders and borrowers together in a way that lowers transaction costs. B) they employ large numbers of people. C) they provide large funds to the stock market. D) they increase costs for banks.