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Questions and Answers

(338 solutions)

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Which of the following both increase the federal funds rate?

  
  
  

Which of the following both increase the federal funds rate?  An increase in the discount rate and a decrease in the interest rate on reserves   An increase in the discount rate and an increase in the interest rate on reserves   A decrease in the discount rate...

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Posted by Cleveland on November 14, 2024

The discount rate is

  
The interest rate the Feds charges banks

  
  

The discount rate is  the interest rate banks receive on reserve balances with the Fed.   the interest rate the Fed charges banks   one divided by the difference between one and the reserve ratio   the interest rate that banks charge on overnigh...

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Posted by Cleveland on November 14, 2024

First National Bank    
Assets                                        Liabilities and Owners' Equity    
Reserves    $1,200                    Deposits    $9,000     
Loans    8,000                            Debt    800     
Short-term securities    800     Capital (owners' equity)    200     
​This bank's leverage ratio is​

First National Bank    Assets                                        Liabilities and Owners' Equity    Reserves    $1,200              ...

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Posted by Cleveland on November 14, 2024

First National Bank    
Assets                                        Liabilities and Owners' Equity    
Reserves    $1,200                    Deposits    $9,000     
Loans    8,000                            Debt    800     
Short-term securities    800     Capital (owners' equity)    200     
​This bank's leverage ratio is​

First National Bank    Assets                                        Liabilities and Owners' Equity    Reserves    $1,200              ...

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Posted by Cleveland on November 14, 2024

First National Bank    
Assets                                        Liabilities and Owners' Equity    
Reserves    $1,200                    Deposits    $9,000     
Loans    8,000                            Debt    800     
Short-term securities    800     Capital (owners' equity)    200     
​This bank's leverage ratio is​

First National Bank    Assets                                        Liabilities and Owners' Equity    Reserves    $1,200              ...

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Posted by Cleveland on November 14, 2024

Choose the correct label for the point on the boxplot represented by the question mark:

unlabelled image

M...

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Posted by Cleveland on September 18, 2024

Fiscal policy, the money market, and aggregate demand

Suppose there is some hypothetical economy in which households spend $0.75 of each additional dollar they earn and save the $0.25 they have left over. The following graph plots the economy's initial aggregate demand curve (AD1).
Suppose now that the government increases its purchases by $3.75 billion.
Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD2) after the multiplier effect takes place.
Hint: Be sure the new aggregate demand curve (AD2) is parallel to AD1. You can see the slope of AD1 by selecting it on the following graph.
The following graph plots equilibrium in the money market at an interest rate of 7.5% and a quantity of money equal to $60 billion.
Show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graph.
Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to    by    .
Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to    by    at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is known as the    effect.
Use the purple line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (AD3) after accounting for the impact of the increase in government purchases on the interest rate and the level of investment spending.
Hint: Be sure your final aggregate demand curve (AD3) is parallel to AD1 and AD2. You can see the slopes of AD1 and AD2 by selecting them on

Suppose there is some hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30.The marginal propensity to consume (MPC) for this economy is0.7   , and the spending multiplier for this economy is3.3333   .Points:1...

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Posted by Cleveland on September 17, 2024
The government possesses the tools necessary to influence the output level in the short run through use of monetary and fiscal policy. However, there is some debate regarding whether the government should attempt to stabilize the economy.
Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply.
Which of the following policies are examples of automatic stabilizers? Check all that apply.

The government possesses the tools necessary to influence the output level in the short run through use of monetary and fiscal policy. However, there is some debate regarding whether the government should attempt to stabilize the economy.Which of the following are arguments in favor of active stabil...

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Posted by Cleveland on September 17, 2024
Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, as well as the pros and cons of using these tools to combat economic fluctuations.
The following graph plots hypothetical aggregate demand (AD), short-run aggregate supply (AS), and long-run aggregate supply (LRAS) curves for the U.S. economy in February 2026.
Suppose the government chooses to intervene in order to return the economy to the natural level of output by using    policy.
Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output.
Suppose that in February 2026 the government successfully carries out the type of policy necessary to restore the natural level of output described in the previous question. In July 2026, U.S. imports decrease because the United States has implemented trade restrictions on Mexican goods. Due to the    associated with implementing monetary and fiscal policy, the impact of the government's new policy will likely    once the effects of the policy are fully realized.

Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, as well as the pros and cons of using these tools to combat economic fluctuations.The following graph plots hy...

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Posted by Cleveland on September 17, 2024
he following graph plots an aggregate demand curve.
Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy.
Suppose the governments of two very similar economies, economy Y and economy Z, implement a permanent tax cut of equal size. The marginal propensity to consume (MPC) in economy Y is 0.85 and the MPC in economy Z is 0.8. The economies are otherwise completely identical.
The tax cut will have a larger impact on aggregate demand in the economy with the    .

The following graph plots an aggregate demand curve.Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy.Your AnswerAggregate Demand0102030405060130120110100908070PRICE LEVELOUTPUTAD1 AD2  Correct AnswerPoints:1 / 1Close Explanation...

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Posted by Cleveland on September 17, 2024