Describe the channels by which monetary policy ripples through the economy and explain how each channel operates
What will be an ideal response?
When the Federal Reserve lowers the federal funds rate, other short-term interest rates also fall. As a result, the exchange rate falls because investors decrease their demand for U.S. dollars since the interest yield on dollars is lower. When the Federal Reserve lowers the federal funds rate it does so by buying securities in the open market. Bank reserves increase so that banks have excess reserves. Because banks have excess reserves, they loan the excess. Loans increase and a multiple expansion of the quantity of money results. The supply of loanable funds increases so that the long-term real interest rate falls and consumption and investment increase. Net exports increase because of the lower exchange rate. All three of these changes increase aggregate demand, so that real GDP growth and the inflation rate both increase.
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________ increases with education, training, and job experience. i. Physical capital ii. Human capital iii. Financial capital
A) i only B) ii only C) iii only D) Both ii and iii E) i, ii, and iii
What are the three main sets of factors that cause the supply and demand curves in the foreign exchange market to shift?
What will be an ideal response?
While corporations bear the statutory incidence of corporate income tax, the economic incidence is likely borne by:
A. shareholders. B. employees. C. customers. D. All of these likely bear some of the economic incidence.
The civilian labor force consists of:
A. all civilians over the age of 16. B. the employed plus the unemployed who are not in the military. C. only individuals who are actually at work during a given week. D. civilians who are not in prisons or mental hospitals.