Suppose that the United Kingdom pegs the pound to the euro and the European Central Bank decides to use monetary policy to offset the possible inflationary effects of European expansionary fiscal policy. Would it expand, contract, or not change the European money supply?
A) expand
B) contract
C) not change
D) The answer cannot be determined using the information provided.
Ans: B) contract
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List and briefly explain the steps in how monetary policy affects real GDP in the AS/AD model using as your example the case when the Fed eases monetary policy to fight a recession
What will be an ideal response?
Suppose an economy has the following characteristics: 100 people in the noninstitutional population; 60 people employed; 20 people not in the labor force. What's the unemployment rate?
A) 20 percent B) 25 percent C) 33 percent D) 40 percent E) 60 percent
If the economy were left on its own without the interference of government or the Fed, it would move toward an equilibrium rate of growth that would produce, with only minor interruptions, full employment without inflation. What school supports this view?
a. Classical. b. Keynesian. c. Monetarism. d. Supply-side. e. Neo-Keynesian.
Spending VCU4 on real-world goods and services causes the nation's:
a. Monetary base to rise. b. M2 money supply to rise. c. M2 money multiplier to rise. d. Monetary base to remain the same.