Suppose the economy is experiencing a recession and high unemployment. What would be the interpretation of how an expansionary monetary policy would address this problem?
What will be an ideal response?
With an expansionary monetary policy, the Federal Reserve buys bonds, lowers the reserve ratio, lowers the discount rate, or reduces the interest rate on reserves. As a consequence of these actions, excess reserves increase, that in turn increases the money supply. When this happens, interest rates fall, investment spending increases and aggregate demand increases. The end result is a rise in real GDP by a multiple of the increase in investment.
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A consumer who chooses the optimal bundle will go to a point on the highest attainable indifference curve.
Answer the following statement true (T) or false (F)
There are at least three exchange rates between every pair of national currencies
a. True b. False Indicate whether the statement is true or false
How do central banks, like the U.S. Federal Reserve, contribute to the welfare of a society?
What will be an ideal response?
Everything else equal, an appreciation of the dollar against the yuan:
A) will lead to a decrease in the quantity of dollars demanded. B) will lead to an increase in the quantity of dollars demanded. C) will not affect the quantity of dollars demanded. D) can either lead to an increase or a decrease in the quantity of dollars demanded depending on the magnitude of the appreciation.