How can the Fed increase the level of output for the economy through open market operations?
What will be an ideal response?
When the Fed buys bonds through open market operations, the money supply increases. If the money demand curve is downward-sloping, the increase in the money supply curve will cause interest rates to decrease. Lower interest rates may induce a higher level of investment and consumer-financed spending. Increased investment (and consumption) spending causes the aggregate demand curve to shift to the right, and the equilibrium output level increases.
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Which of the following is not a determinant of the demand for a particular good?
a. the prices of related goods b. income c. tastes d. the prices of the inputs used to produce the good
Given the demand and supply conditions shown in Figure 4-2, if the government imposes a price ceiling of a, indicate the quantity consumers would like to buy and the amount producers would be willing to supply.
a. Consumers would want to buy t; producers would be willing to sell r. b. Consumers would want to buy r; producers would be willing to sell t. c. Consumers would want to buy t; producers would be willing to sell s. d. Consumers would want to buy s; producers would be willing to sell s.
Which of the following would be a positive economic statement?
a. Bankers are now charging higher interest rates on credit cards to cover the increased cost of loaning funds to consumers b. The United States should be more aggressive in its trade negotiations with its major trading partners to help reduce the trade deficit c. More money should be allocated by the Federal government to social programs and less money to national defense d. Rents for apartments in this city are too high and must be controlled by city government to keep landlords from making too much profit
The text discusses reason why the AD, SAS and LAS curves shift rightward overtime. If there is inflation, which curve shift rightward at a faster pace?
What will be an ideal response?