The inflation rate in Genovia has been rising constantly. What can the central bank of the country do to control inflation?
What will be an ideal response?
The central bank of Genovia should reduce the quantity of bank reserves deposited at the central bank by selling government bonds to private banks. This will lead to an increase in the federal funds rate which will in turn lead to an increase in the long-term interest rate. As a result, both consumption and investment will fall. A fall in consumption and investment leads to a decrease in aggregate demand. As a result, the aggregate price level will fall.
You might also like to view...
Refer to above figure. With a specific tariff of $3 per unit, what is the quantity of Widgets produced domestically?
What will be an ideal response?
An example of a market subject to adverse selection would be:
A. the used car market. B. the insurance market. C. the financial market. D. All of these statements are true.
Consumer surplus is equal to the
a. Value to buyers - Amount paid by buyers. b. Amount paid by buyers - Costs of sellers. c. Value to buyers - Costs of sellers. d. Value to buyers - Willingness to pay of buyers.
Suppose that a study is released stating that as people increase the number of times they brush their teeth each day, they increase the number of times they go to the gym each week. This is best described as an example of
A. positive correlation. B. negative correlation. C. positive causation. D. negative causation.