What are the three monetary policy tools of the Fed? Briefly describe how each tool can be used to implement an expansionary monetary policy and a contractionary monetary policy
What will be an ideal response?
Open market operations, the discount rate, and the reserve requirement are the three policy tools available to the Fed. Expansionary monetary policy: an open market purchase of government securities, a decrease in the discount rate, and a decrease in the reserve requirement will result in an increase in bank reserves. As the increase in bank reserves works through the fractional reserve banking system yielding an increase in the money supply. Contractionary monetary policy: an open market sale of government securities, an increase in the discount rate, and an increase in the reserve requirement will result in a decrease in bank reserves. As the decrease in bank reserves works through the fractional reserve banking system yielding a decrease in the money supply.
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In the figure above, line A represents the
A) the line of market income distribution. B) line of equality. C) line of equal number of people in each household. D) line of equal consumption in each household.
Where does most of personal income come from?
a. Personal Interest b. Transfer Payments c. Proprietor's Income d. Wages and Salaries
Refer to the graph above. Assume that the economy is in a recession with a price level of P 1 and output level Q 1. The government then adopts an appropriate discretionary fiscal policy. What will be the most likely new equilibrium price level and output?
P1 and Q1 P1 and Q3 P2 and Q2 P2 and Q4
Granting exclusive territories to distributors:
A. discourages double markups and encourages free-riding. B. discourages free-riding but generates double markups. C. encourages double markups and free-riding. D. discourages double markups and free-riding.