C. persistent currency depreciation relative to primary trading partners. a. Elastic. c.) The economy is producing the maximum amount possible given current resources. Refer to the following figure to answer the questions that follow.According to the figure, contractionary monetary policy will cause an economy that is initially at full-employment output to go from equilibrium __________ to equilibrium __________ in the short run. Which earlier social engineering program directly influenced Johnson's initiatives? The Fed (1) ____________ controls the money supply through open market operations. They can specify penalties and punishments for noncompliance. since monetary policy shifts the aggregate demand curve, it was not able to deal with the aggregate supply issues that led to the Great Recession. True or False: monetary policy affects the aggregate demand curve in the aggregate Which federal agency handles mapping in the United States? someone who tries to influence the government in an organized way. 4. increase Norah walks into her own department store, Bullseye, to pick out a new dress. Then, a critical piece broke down. Business. Which resource management agency would most likely set guidelines for oil pipelines and windmills? 1. Which statement about executive orders is accurate? In the long run, ____________ prices adjust. It limits the printing and circulation of new money. Which of the following is true regarding capitalism and communism? Which policy perspective sees foreign affairs as a network of connected interests that can be best influenced by diplomacy? 7. Which of the following tax codes is most progressive? the results with the class. When a company issues stock, it is agreeing to share the company's __ and __ with the investor. Suppose that the Fed engages in an expansionary monetary policy, which reduces interest rates. a. Explain briefly. The economy's long-run potential, or what economists call full employment. 4. A. - Provides info. (nearest tenth), Suppose a wealthy family decides to move $50 million from their Swiss bank account to their Bank of America account. The short run effects of quantitative easing are a(n) ________ in the price level with a long run ________ in the real value of money. 1. indirectly C. Money is always the best possible store of value. Decrease disposable income and slow down the economy. When inflation is low stable high , the Fed aims to slow the economy. What is the total change in the M1 money supply from this one deposit? * a. more spending b. more savings c. increase in money supply d. lower interest rates e. none of the choices Expert Solution Want to see the full answer? When the demand for loanable funds increase, interest rates decline. a. What does the word 'fiscal' refer to when discussing fiscal policy? How much can a bank lend from an initial 1k deposit? Smaller overall progressivity in the tax code. What specific group takes responsibility for the actions? The gov. - Oversees the buying and selling of gov. Which of the following policy actions can the Federal Reserve use to address this problem? What essential characteristic of money does fresh fish lack that most makes it ineffective? Since then, 40 countries around the world have begun using some form of polymer banknotes. Select the proper policy recommendation or economic prediction for each of the following scenarios. the right. It creates inflation. A foreign entity holding cash is considered a leakage in the economy. Assume of 8% reserve requirement in the U.S. and no money leakages: What was historically significant about the Brown v. Board of Education decision, a product of the Warren Court? . Cypress Explain your reasoning. M1 is the narrowest definition of the money supply. the left. c. A monetary injection directly impacts the money supply, while a fiscal expansion directly impacts the aggregate demand curve. a. Which of the following tax rates may affect an individual's decision to work harder and earn additional income? Which of the following is a possible explanation as to why this policy failed to restore the economy to long- run equilibrium. Contractionary monetary policy is when a central bank uses its monetary policy tools to fight inflation. Investment is a What was Nixon's argument for not turning over the Watergate tapes? The __ enables calculation of the maximum amount of money that can be created from a dollar deposited into the banking system. If things arent going wellunemployment is high growth is lowthen more money flowing around the economy makes it easier for people to get . Increasing individual tax rates through fiscal policy will most likely have which effect on the economy? You reply that: OMOs are the purchase and sale of gov. Your are Chair of the Federal Reserve Board. Which of the following shows the affect of the monetary policy? Bill of 1944? The market for loanable funds most specifically connects: ______ minimize the risk of lending money by pooling money from many savers and lending to many borrowers. Economics questions and answers. Think of a problem or issue that concerns you. the military Which phrase best describes the economy of the former Soviet Union and present-day North Korea? borrowing. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock).This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale . - The ability to attract foreign direct investment a type of fiscal policy that automatically kicks in without the discretion of policymakers. Monetary policy is under the control of this agency. What is the simple money multiplier? Survey at least It involves spurring or slowing economic activity using taxes and government spending. Consider the graphs, which show aggregate supply (AS) and the change in aggregate demand (AD) from AD1 to AD2 that will result from the monetary policies. Which statement is an example of and open market operation? When the nominal interest rate is rising the real interest rate is necessarily rising: when the nominal interest rate is falling, the real interest rate is necessarily falling. True or False: The Fed can _____________ the money supply by lowering this rate. She is especially excited because she has been saving money each week in her piggy bank at home so that she can afford a trip to Florida next summer. (Refer to Quizlet Guide Picture #2), What are Bank Uno's loans in Table 2? What is an example of an item that would fall under mandatory spending? During deflationary periods, central banks reduce their policy rates to as low as zero. State laws. Supply-side economic policies are sometimes referred to as: The central idea of supply-side economics is that certain types of tax cuts will increase: Which of the following policies would be supported by a supply-side economist? Which of the following is a tool that the U.S. president can use on his or her own to affect foreign policy? Expansionary monetary policy is simply a policy which expands (increases) the supply of money, whereas contractionary monetary policy contracts (decreases) the supply of a country's currency. 2014 6% - Reduces the money supply, Is a result of a contractionary monetary policy (tight money policy), What are the results of a contractionary monetary policy, which intends to slow down the economy, and what are not? provides a larger incentive for firms to invest. Transcribed Image Text: Suppose the demand for a product is P = 150-Q and that the marginal cost of producing the product is $30. Contractionary monetary policy is when a central bank uses its monetary policy tools to fight inflation. His pennies total $5000. This entity enforces rules and laws related to the stock market. It is sometimes above its long-run potential. Despite numerous data trends suggesting a recessions, the FOMC waits until their monthly scheduled meeting to change the direction of current monetary policy. OIt lowers taxes levied of large corporations. The Federal Reserve, which maintains reserve banks across the United States, is responsible for monetary policy. Expansionary monetary policy that is destabilizing Expansionary monetary policy that . - Real GDP Injecting new money into the economy eventually causes: As the prices of goods and services decrease, the value of money: What did the Federal Reserve do in response to the Great Recession? 2. changing the amount of money budgeted for government projects. A company has been running an assembly line with 97.42%%97.42 \% \%97.42%% of the products made is acceptable. The Federal Reserve determines monetary policy in the U.S. Is included in the calculation of this year's U.S. GDP. Which diplomatic tool is often used to follow up on an initial agreement? - $500. The actual money multiplier is lower than the theoretical maximum because of __ in the economy. Expansionary fiscal policy is the opposite of contractionary fiscal policy. Business Economics Classify the actions described as examples of expansionary monetary policy (intended to stimulate the economy), contractionary or restrictive monetary policy (meant to slow down the economy), or not an example of monetary policy. The actual level of aggregate demand is less than the full employment level of output. - The ability to target interest rates in the economy spending. In many countries, one of the roles of the central bank it to provide loans to distressed financial institutions. the ease of converting an asset into cash. Contractionary monetary policy causes A) aggregate demand to rise and the price level to fall. - The President signs a tax cut bill intended to encourage additional consumer spending. The Federal Reserve generally uses ___________________ to implement monetary policy. Suppose that you are employed as an advisor to the central bank. She quickly walks to checkout line where she pays the cashier for her new dress. Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, David R. Anderson, Dennis J. Sweeney, James J Cochran, Jeffrey D. Camm, Thomas A. Williams. This lowers the interest rate, which Chapter 11 - Money and Monetary Policy 4 23. President Lyndon B. Johnson created a set of programs that were known as the Great Society. Slovenia Central banks have four main monetary policy tools. Which of the following is NOT an example of an automatic stabilizer? What is the amount that Robina Bank must keep on hand as required by the Federal Reserve (Fed)? Which form of foreign aid involves many nations sharing a common goal and jointly contributing to a common fund? All of the following are examples of fiscal policy to lower unemployment, EXCEPT: Which of the following is a possible negative consequence of decreased taxes and increased government spending? B. Determine the 35% recommended maximum for monthly housing costs. A contractionary policy is a type of monetary policy that aims to decrease the money supply, reduce spending, and lower inflation. Samples of 500 pieces were selected at random, and the defective rate was found to be 0.025%0.025 \%0.025%. d. This lowers the interest rate, which provides a larger incentive for firms to invest. (Refer to Quizlet Guide Picture # ) Which of the following would be LEAST likely to occur during an expansionary gap? Which of the following best describes an contractionary monetary policy? One advantage of polymer banknotes is that they dramatically reduce counterfeiting. Contractionary monetary . Money represents anything that can be exchanged for goods and services or the: Money has three roles in an economy. Q. Imagine that your are the writer of a newspaper column in which you answer letters from teens seeking advice. Assume of 8% reserve requirement in the U.S. and that Bank of America account holds no excess reserves: b. At full employment levels, how does the SRAS affect price level? Consider the various actions listed below that can be taken by the Federal Reserve System. Contractionary or restrictive monetary policy (tight money policy) will cause interest rates to: When current output is greater than potential output, which of the given monetary policies is the Federal Preserve (Fed) likely to enact? risk. Which of the statements best describes the monetary rule, as proposed by the economist Milton Friedman? 2015 6%. For instance, when the Fed buys bonds, this (2) _________ in demand for bonds causes nominal interest rates to (3) _________. Select the proper policy recommendation or economic prediction for each of the following scenarios. Which phrase best describes the economy of the former Soviet Union and present-day North Korea? True or False: the maximum amount by which the U.S. money supply can grow as a result of the family deposit. Which approach to fiscal policy involves and increase in taxation and decrease in spending? When the economy is growing too slowly (recession) or too quickly (high inflation), the two approaches the government can use, according to economists, include which of the following? (7) ________ remained in a recession longer than other nations due to very slow economic growth. Which of the following best describes the purpose served by economic models within an economic system? The European Central Bank, responsible for monetary policy within the European Union. securities, which results in a $2000 billion decrease in the money supply. During which century did the federal government begin to regulate businesses in the U.S.? True or False: Which step in the rule-making process makes the new regulations available to the public for review? - The President signs legislation that extends the duration of unemployment benefits for people that are out of work Which phrase best describes non-governmental international organizations? Classify the actions described as examples of expansionary monetary policy (intended to stimulate the economy), contractionary or restrictive monetary policy (meant to slow down the economy), or not an example of monetary policy. The main goal of monetary policy is to shift. groups of individuals and/or private corporations coming together and trying to solve global problems. The higher the CRR, the lower is the liquidity with the banks and vice-versa. Banks must lend out all their excess reserves in order to change the M1 money supply. 2. The government will use its fiscal policy toolkit to do what? - Marginal propensity to consume - Overseas national banking and consumer credit regulation, Board of Governors of the Federal Reserve System, Consider the various actions listed below that can be taken by the Federal Reserve System. The reserve requirement is the proportion of its deposits that a bank must keep on hand and not use to create money through making loans to borrowers. It is typically implemented by a central bank or a monetary authority to control the money supply and maintain price stability. Assume of 8% reserve requirement in the U.S. and that Bank of America account holds no excess reserves: When there is a downside gap between actual equilibrium, real GDP, and the full-employment level of real GDP, what do economists call this? The _______ rate influences nearly all other interest rates in the economy. In the years leading up to the financial crisis of 2008-2009, the market for housing can be described as: booming, driven by rising prices and increased demand due to low interest rates. The difference between an economy's actual and potential output. $66500 - $5000. Refer to the following figure to answer the questions that follow. It's how the bank slows economic growth. A new technology is discovered that promises an increase in cheap computing power in the future. 3. In a monetary economy there always has to be a double coincidence of wants. Which statement best describes how the circular economic flow will be affected by this action? 2. They help offset declines in aggregate demand during recessions. (Refer to Quizlet Guide Picture #2), What are Bank Duo's loans in Table 3? Expert Answer Question 8 Monetary policy generally impacts interest rates. Which of the following best describes how contractionary Which phrase best defines the term lobbyist? A contractionary gap occurs when which of the following occurs? this target rate for Ionia, according to the Taylor rule. demandaggregate supply model? The share of deposits that banks must have in reserves is the __________. (a) expansionary monetary policy that effectively removes the economy from a recessionary gap; (b) expansionary monetary policy that is destabilizing; (c) contractionary monetary policy that effectively removes the economy from an inflationary gap; and (d . What is the amount that Robina Bank must have in excess reserves from this initial deposit? 2003-2023 Chegg Inc. All rights reserved. Excess Reserves = ? Why is an 'expansionary gap' sometimes referred to as an 'inflationary gap'? 30 seconds . How does it affect the accounting equation? What was one outcome of the G.I. -to protect constitutional rights, safety, and fairness -to ensure that property rights are protected 2011 0% In which case is the wage elasticity of demand more elastic? The Federal Deposit Insurance Corp. (FDIC) protects bank depositors from bank failure. The New Deal, introduced by President Franklin D. Roosevelt, attempted to relieve the distress caused by Great Depression, which began with the stock-market crash of 1929. Fiscal policy is the responsibility of the government. It's how the bank slows . What are the main purposes of regulatory policies? Contractionary monetary policy is a strategy used by a nation's central bank during booming growth periods to slow down the economy and control rising inflation. The objective behind controlling the money supply is to achieve a targeted inflation rate. Year Actual Inflation rate Increase government spending, lower taxes, or raise transfer payments. The economy has entered a recession with high unemployment. Spain Which statement describes the overall value of the Marshall Plan as foreign policy? securities as a form of monetary policies What was Nixon's argument for not turning over the Watergate tapes? He is now 45 and deposits his savings into a bank. With adaptive expectations, what is the inevitable consequence of an active, expansionary monetary policy in the short and long run? . What needs to be true for there to be an expansionary gap? (#121), decreases in investment and a slowing of output growth. The size of commercial banks' excess reserves decreases, the money supply decreases, and the interest rates rise, thereby causing a decrease in investment spending and real GDP. Which of the following statements best describes the use of fiscal policy during a recession? Higher interest rates that decrease private investment. Select the proper policy recommendation or economic prediction for each of the following scenarios. Contractionary monetary policy directly pulls money out of Portugal True or False: Suppose the President plans to cut taxes for consumers and also plans to increase defense spending. unexpectedly gives each person in the economy an extra $1000 tax refund. Mexican pesos, Identify each factor which contributed to Swiss banks becoming the world's largest holders of offshore funds, - Switzerland's history of neutrality inflation is kept in check in the long run by keeping the growth of M1 and M2 on a steady path. There is a declining interest among teenagers to pursue a career in science and health care (U.S. News & World Report, May 23, 2011). According to the permanent income hypothesis, which situations would result in an immediate increase in consumer spending, which would result in an immediate decrease in consumer spending, and which would result in no change in consumer spending? Money leakages, however, are quite high. Indicate whether each of the following would cause the Mexican peso to appreciate or depreciate. Investment is a What is the appropriate contractionary fiscal policy response when inflation goes from a 3% to 10% annual rate and real GDP rises from 2% to 10%? Phil Frugal has been saving his pennies since he was five years old. Which of the following statements best descrbes the impact of this event on the stock market? The demand for physiotherapists, at physiotherapy clinics. decreasing reserves to increase interest rates, Which of the given statements is the most direct result of the correct monetary policy from the first question? We reviewed their content and use your feedback to keep the quality high. Required reserves and leakages amount to 33% of deposits. - A reduction in the occurrences of rampant inflation, Suppose that you are employed as an advisor to the central bank. The demand for physiotherapists, at physiotherapy clinics. True or False: Which of the following will a Keynesian economist most likely favor if the economy is operating at point a? provides a larger incentive for firms to invest. Monetary Policy: The monetary policy is one of the two prominent policies used to control the money supply in a given economy, the other being the fiscal policy. Which cabinet level agency oversees the U.S. a. According to supply-side economists, how are taxes and economic growth related? Since Estrovia has inflation rate of 9% as compared with average of 4%, her central bank should implement a contractionary monetary policy to lower the inflation rate, otherwise the economy will heat up and hit a severe recession. Individuals and companies depositing U.S. dollars into Swiss bank accounts represent a (1) _________________ in the U.S. which (2) ________________ the actual U.S. money multiplier relative to its potential. This type of fiscal policy is best used during times of economic downturn, and it can increase a country's gross domestic product (GDP) through a principle called the "fiscal multiplier" (or the amount in which government spending can increase the national income). She checks out the price tag and is excited to see that the dress is on sale and is now relatively cheaper than another dress she was considering. Select the proper policy recommendation or economic prediction for each of the following scenarios. (round to one decimal place) Which of the following is a tool that the U.S. president can use on his or her own to affect foreign policy? What is Ionia's output gap? To counteract a recession, the Federal Reserve should: Buy securities on the open market and lower the discount rate. . Label the scenarios with the type of monetary policy lag represented in each. True or False: A portion of the data is shown. component of aggregate demand, so this shifts aggregate demand to When actual output exceeds its long-run potential, inflation is the result. 24. Expansionary monetary policy shifts aggregate demand to the right, moving the economy from long-run equilibrium to a short-run equilibrium with a higher price level and a higher level of real GDP. They would decrease tax rates in order to increase disposable income, leading to more spending and, ultimately, more jobs. 1. A monetary policy that lowers interest rates and stimulates borrowing is known as an expansionary monetary policy or loose monetary policy. 3. High levels of government debt can accrue. Banks in Ruritania have a required reserve ratio of 5%. Researchers announce that they anticipate a breakthrough in the effectiveness of training for low-skills workers within the next decade. That's when prices rise too fast in clothing, food, and other necessities. component of. - Supervises and regulates member banks a target rate of annual inflation is maintained by expanding or contracting the money supply. Data on GDP is release quarterly, meaning that an economic downturn beginning in January may not be identified until more than three months later. A. an increase in the pace of domestic GDP growth. 2013 3% Investment is a component of aggregate demand, so this shifts aggregate demand to the right. Which issue is typically addressed by federal public policies? A recent example of expansionary monetary policy was seen in the U.S. in the late 2000s during the Great Recession. The higher taxes are, the less economic growth there will be. What is the first step toward becoming a U.S. Supreme Court judge, according to Article III of the Constitution? To curb inflation and reduce the money supply,. Explain why the U.S. demand for Mexican pesos is downsloping and the supply of pesos to Americans is upsloping. Raise taxes and decrease government spending. - The central bank buys bonds from private banks. President Lyndon B. Johnson created a set of programs that were known as the Great Society. 2. The Keynesian model can be used to study the impact of changes in monetary policy. - Banks decide to keep some excess reserves on hand. Changes in the money supply (M) will balance out with changes in prices (P). Expansionary fiscal policy is designed to increase aggregate demand. The Great Recession. c. Section 11(c) of the OSH Act. Explain the sequence of links connecting an expansionary monetary policy with interest rates, intended investment, aggregate demand, and output. According to the figure, if the economy started at full-employment output, contractionary monetary policy would cause real gross domestic product (GDP) to __________ in the short run. Which panel in the figure below best describes the situation in each of (a)-(d)? The OSHA standards. In your meeting with the Federal Open Market Committee, the committee unanimously votes to increase the money supple using open market operations (OMOs). Tags: Question 7 . Many studies have examined the data on inflation and unemployment in or-der to estimate the cost of reducing inflation.The findings of these studies are of-ten summarized in a statistic called the sacrifice ratio.The sacrifice ratio is the number of percentage points of annual output lost in the process of reducing in-flation by 1 percentage point. It increases federal spending on infrastructure. It began the process of school desegregation. someone who tries to influence the government in an organized way. How does a progressive tax code affect consumers? What is the best and quickest way to find out the purpose of specific government agency? Output in the short-run is below the potential output of the economy. 1. Suppose that the required reserve ratio is 6.00%. Expansionary Monetary Policy. Which statement best describes contractionary monetary policy? The U.S. Constitution states that the federal government can and should establish both an army and a navy. If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is 7 percent. John Maynard Keynes believed that fiscal policy designed to deal with budgets should _____. Which form of communication currently plays the most immediate role in broadcasting politicians' positions on public policy? 120 seconds. Contractionary monetary policy directly puts money into the In 2007, the Federal Reserve lowered interest rates in order to stimulate the economy. The choices offered in the questionnaire are science, business, and other. How does NASA's research contribute to our understanding of the earth? 5. decrease. _____ fiscal policy addresses a _____ economy, while _____ fiscal policy addresses an _____ economy. Which is true about actual economic output during different times of the business cycle? Change ($) = ? use the best measure of center for both data sets to determine whether the club should increase . In 1988, Australia introduced a commemorative $10 banknote made of plastic (polymer). Assume the economy is in a recession and the Federal Reserve takes the appropriate monetary policy actions. - Engaging in fiscal policy Central banks can use monetary policy to: make it easier for people and businesses to borrow. Option C Due to expansionary monetary policy, LM curve would shift to right leading to decrease in market interest rate . At =.05\alpha=.05=.05, what is your conclusion? 1. provides a larger incentive for firms to invest. Contractionary monetary policy is when a central bank uses its monetary policy tools to fight inflation. Contractionary monetary policy directly pulls money out of If expansionary fiscal policy is necessary, what changes should the government make to spending or taxes? Which of the following best describes the effect on the SRAS curve if political negotiations result in a substantial decrease in the price of oil? d.) The unemployment rates are falling. There is an accompanying Practice Book and Teacher's Resource CD-ROM available separately. B. Investment is a component of aggregate demand, so this shifts aggregate demand to the right. In 2013, (1) _______ suffered from an unemployment rate of 25% and huge amounts of debt. When the Fed buys bonds, bank reserves (4) __________, which reduces the need for banks to borrow. It limits the printing and circulation of new money. How do lag times differ between monetary policy implementation and fiscal policy implementation? Which of the following statements about real and nominal interest rates is correct?
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