When the central bank pursues contractionary monetary policy, we that this policy will result in an increase in the interest rate, a reduction in investment, a reduction in demand, and a lower level of equilibrium output. Explain what happens to the position of the IS curve as the central bank pursues contractionary monetary policy
What will be an ideal response?
Changes in the interest rate do cause changes in investment, demand, and output. However, they do not cause shifts of the IS curve. Changes in the interest rate cause movements along the IS curve.
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Which of the following will create the largest increase in the money supply?
A. the Federal Reserve sells bonds and the banks choose to hold more excess reserves B. the Federal Reserve buys bonds and the banks choose to hold less excess reserves C. the Federal Reserve buys bonds and the banks choose to hold more excess reserves D. the Federal Reserve sells bonds and the banks choose to hold less excess reserves
Where do the FDIC's funds come from?
A) Congress appropriates money for the FDIC, just as it does for other federal agencies. B) The FDIC earns income through the insurance premiums paid by insured banks and from investment earnings. C) The FDIC sells bonds in the financial markets. D) The FDIC relies on voluntary contributions from the banking community.
Piece rates are used when:
a. an individual's output is independent of others and can be easily measured. b. the job involves team production. c. an individual's output can be affected by random events. d. monitoring is difficult.
Suppose Joe's MRS for cookies with crackers is 6 crackers per cookie. Also assume that Mary's MRS for cookies with crackers is 3 crackers per cookie. Assuming that these rates of substitution don't depend on the amounts consumed, which of the following trades would make both Joe and Mary better off?
A. Joe gives Mary 5 crackers in exchange for a cookie. B. Joe gives Mary 2 crackers in exchange for a cookie. C. Joe gives Mary 6 crackers in exchange for a cookie. D. There is not enough information to answer the question.