Describe how a central bank can increase aggregate demand by influencing expectations
What will be an ideal response?
When households and businesses expect interest rates to remain low, they are more willing to spend now and, even, to borrow, knowing that they will earn little on saving and be able to borrow in the future, at low cost, if they so choose. This willingness to spend and borrow, combined with an increase in the money supply by increasing bank deposits, will increase aggregate demand, so long as the banks can find suitable borrowers.
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Which of the following provides support for the use of discretion in economic policy-making?
A) any policy rule that is based on a particular model will prove wrong if that model is wrong B) the existence of a political business cycle C) the conclusions of Friedman and Schwartz with respect to monetary and fiscal policy D) the Watergate scandal
The unemployment rate is the percentage of:
a. the total adult population without jobs. b. adults who are in the labor force but who do not have jobs. c. the total adult population that are not working full-time jobs. d. the population without jobs.
When OPEC cut energy production in 1973, the aggregate supply curve shifted outward
a. True b. False Indicate whether the statement is true or false
In which of the following categories would an agreement to trade currencies in pre-set amounts at a certain date in the future be included?
a. an option b. a futures contract c. a forward contract d. a swap