What is the maximum possible increase in the money supply as a result of your bank account? The Federal Reserve, which maintains reserve banks across the United States, is responsible for monetary policy. Survey at least The _______ rate influences nearly all other interest rates in the economy. Suppose the table below lists the actual annual inflation rates for 2010 to 2015. Consumer spending depends on both the income and wealth of people in the economy. The AD-AS model can be used to study the impact of changes in the general level of wages on production, income, empl . Bonds are IOU from a business or government promising to pay back the value of the bond plus interest payments _____ pay(s) the lowest interest rate. Fiscal policy is the responsibility of the government. It is typically implemented by a central bank or a monetary authority to control the money supply and maintain price stability. Which of the following best describes the sequence of events in the conduct of contractionary monetary policy using open market operations (in an economy with low inflation and a stable banking system)? 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. Suppose that the Fed engages in an expansionary monetary policy, which reduces interest rates. Check out a sample Q&A here See Solution star_border Students who've seen this question also like: Suppose the Fed sells $200 billion in gov. What is an example of an item that would fall under mandatory spending? To counteract a recession, the Federal Reserve should: Buy securities on the open market and lower the discount rate. It limits the printing and circulation of new money. You reply that: OMOs are the purchase and sale of gov. Norah walks into her own department store, Bullseye, to pick out a new dress. True or False: 1. government spending, taxes, and transfer payments; aggregate demand. Expansionary Monetary Policy. Expansionary fiscal policy is the opposite of contractionary fiscal policy. It decreases the ability of brokers to trade stocks. Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, David R. Anderson, Dennis J. Sweeney, James J Cochran, Jeffrey D. Camm, Thomas A. Williams. So, 6) Suppose you are in charge of sales at Novartis (the largest pharmaceutical compa-ny) and your company sells a drug that causes bald men to grow hair. - Real GDP - The Federal Reserve purchases bonds on the open market - The Federal Reserve decreases the discount rate 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. If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is 7 percent. What level of government levies sales tax? Cypress D. The stock of money consists largely of notes and coins. Assume of 8% reserve requirement in the U.S. and that Bank of America account holds no excess reserves: . True or False: Which of the following policies is a component of supply-side fiscal policy? Which policy is appropriate when a rising aggregate price level is a concern but GDP is growing at an acceptable rate? Which statement best describes contractionary monetary policy? What does the Tenth Amendment have to do with American federalism? Which of the following is true regarding capitalism and communism? Which public health and safety agency would be most likely to investigate the safety of a new over-the-counter medicine? By shifting aggregate demand, monetary policy can affect __________ and __________. If expansionary fiscal policy is necessary, what changes should the government make to spending or taxes? Which program or agency accounts for the greatest amount of discretionary spending by the United States federal government? Slovenia Which of the following is an example of contractionary monetary policy? A typical estimate of the sacrifice ratio is 5. American Government module 3 Exam study guide, Module 5 Principles of American Democracy, Christina Dejong, Christopher E. Smith, George F Cole. This raises the interest rate, which Is included in the calculation of this year's U.S. GDP. - $4500. b. Calc. Monetary policy is under the control of this agency. _________ indicates a short-run inverse relationship between inflation and unemployment rates. 3. - The Federal Reserve decreases the discount rate some ways they avoid or reduce each 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? (nearest tenth), Suppose a wealthy family decides to move $50 million from their Swiss bank account to their Bank of America account. Expansionary fiscal policy is designed to increase aggregate demand. Match each policy with the graph showing the corresponding shift. If a nation is operating at full employment and the central bank engages in contractionary monetary policy, how will the interest rate and the unemployment rate change? Significant revisions to quarterly GDP data and monthly unemployment data delay the identifications of the start of a recession. 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 phrase best describes the economy of the former Soviet Union and present-day North Korea? The Federal Reserve (Fed) has very little effect on the money multiplier. This agency was founded by Franklin Roosevelt in response to the stock market crash of 1929. 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. a. The purpose of contractionary fiscal policy is to slow growth to a healthy economic level. True or False: B) aggregate demand to fall and the price level to rise. Another potential role of central banks is to foster confidence in the banking system by making sure that people can retrieve their money even if a bank goes bankrupt. Rural development is the specialty of which cabinet-level agency? Which of the following tax codes is most progressive? provides a larger incentive for firms to invest. True or False: A decrease in a country's total imports is most likely caused by: answer choices. 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 following are the main limitations of the monetary policy adopted by the Reserve Bank: 1. It is sometimes above its long-run potential. When inflation is low stable high , the Fed aims to slow the economy. Which step in the rule-making process makes the new regulations available to the public for review? - Distributes coin and currency Contractionary Expansionary Fixed monetary policy involves decreasing the money supply. 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. We've recently seen cases in which central banks have even opted for negative rates. Contractionary monetary policy is the opposite of expansionary monetary policy. Suppose a wealthy family decides to move $50 million from their Swiss bank account to their Bank of America account. (round to two decimal places) M1 is the narrowest definition of the money supply. b. Australia's commemorative banknote is included ______________ of Australia's money supply. What is the amount that Robina Bank must have in excess reserves from this initial deposit? Executive privilege allowed him to withhold them. Based on orders received and forecasts of future demand, it is estimated that the demand (in units) for the next four seasons is: Fall 10,000; Winter 8000; Spring 7,000; Summer 12,000. The Federal Reserve was created by the Federal Reserve Act of 1913. A monetary policy that lowers interest rates and stimulates borrowing is known as an expansionary monetary policy or loose monetary policy. - Managing the U.S. money supply You calculate that price elasticity of demand for this drug at the current market price is -1.4. If the supply of money decreases, what happens in the money market? - Provides info. Select the proper policy recommendation or economic prediction for each of the following scenarios. Suppose that you are employed as an advisor to the central bank. - Price level, Suppose that a central bank pursues expansionary monetary policy by purchasing bonds. Inflation is running at 1%, but the chairman considers an inflation rate of 3% to be a reasonable goal. His pennies total $5000. I know you will do great on your test. - Managing China's money supply. High levels of government debt can accrue. There is an accompanying Practice Book and Teacher's Resource CD-ROM available separately. the right. What is the total change in the M1 money supply from this one deposit? 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%? c.) The economy is producing the maximum amount possible given current resources. Which federal agency handles mapping in the United States? The U.S. economy moves into a severe recession. She quickly walks to checkout line where she pays the cashier for her new dress. The interest rate banks charge each other for very short-term loans is the ___________. Which statement best describes contractionary monetary policy? Contractionary fiscal policy is used to offset which of the following? In the long run, the decrease in the money supply will cause the price level in the economy to __________ and real GDP to ___________. 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? The Securities and Exchange Commission was founded by Franklin Roosevelt during the Great Depression. Bitcoins According to the figure, if the economy started at full-employment output, expansionary monetary policy would cause real gross domestic product (GDP) to ______________ in the short run. What measurement focus is used in government-wide financial statements? Despite numerous data trends suggesting a recessions, the FOMC waits until their monthly scheduled meeting to change the direction of current monetary policy. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. From the standpoint of an investor, investing in a stock or bond is similar. 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. This lowers the interest rate, which provides a larger incentive for firms to invest. 2. A. * 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? Which of the following will a Keynesian economist most likely favor if the economy is operating at point a? This raises the interest rate, which provides a lesser incentive for firms to invest. Which of the following shows the affect of the monetary policy? The use of government spending, taxes, and transfer payments to influence aggregate demand. component of. Compose a letter briefly describing the background of the problem. True or False: True or False: Principles of Economics 8th Edition ISBN: 9781305585126 (3 more) N. Gregory Mankiw 1,337 solutions Principles of Microeconomics 6th Edition ISBN: 9780538453042 (8 more) N. Gregory Mankiw 791 solutions Essentials of Investments 8th Edition ISBN: 9780077246013 Alan J. Marcus, Alex Kane, Zvi Bodie 667 solutions Contemporary Economics Phil Frugal has been saving his pennies since he was five years old. President Lyndon B. Johnson created a set of programs that were known as the Great Society. Change ($) = $4 million What would be the most likely predictions people make about the inflation rate for 2016 based on adaptive and rational expectations theories, respectively? How does NASA's research contribute to our understanding of the earth? 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. The main contractionary policies employed. Bank of America Liabilities = Deposits It is a medium of exchange, a unit of account, and a: The M1 definition of the money supply used by the government includes: Currency and demand deposits (checking/debit accounts). Monetary policy is the domain of the U.S. Federal . 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. a target rate of annual inflation is maintained by expanding or contracting the money supply. the loanable funds market. Which public health and safety agency would be most likely to investigate the safety of a new over-the-counter medicine? To curb inflation and reduce the money supply,. component of aggregate demand, so this shifts aggregate demand to My boyfriend is stressed, so I am helping him study for his exam. What are The Great Recession. What essential characteristic of money does fresh fish lack that most makes it ineffective? 4. increase The Federal Reserve announces that it will steadily raise the federal funds rate. 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? Select the proper policy recommendation or economic prediction for each of the following scenarios. Which of the following statements best descrbes the impact of this event on the stock market? C. persistent currency depreciation relative to primary trading partners. John Maynard Keynes believed that fiscal policy designed to deal with budgets should _____. Transcribed Image Text: Suppose the demand for a product is P = 150-Q and that the marginal cost of producing the product is $30. Which of the following is a tool that the U.S. president can use on his or her own to affect foreign policy? securities, which results in a $2000 billion decrease in the money supply. Explain the U. monetary policy experience of the 2000-2017 period in the context of Federal Reserve priorities and monetary policy actions. Which type of agency would be most likely to focus on protecting the nation's borders? Higher disposable income, higher consumption, higher real GDP, lower unemployment. How could monetary policy lower inflationary expectations? a. Your are Chair of the Federal Reserve Board. An automatic stabilizer is BEST defined as _____. Which event is most likely an outcome of research by the Environmental Protection Agency? He is now 45 and deposits his savings into a bank. Match each policy with the graph showing the corresponding shift. Which of the following is a tool that the U.S. president can use on his or her own to affect foreign policy? Imagine that your are the writer of a newspaper column in which you answer letters from teens seeking advice. -Appointed by the president to serve 14 year terms 120 seconds. (Refer to Quizlet Guide Picture # ) d. Contractionary monetary policy directly puts money into the According to the U.S. constitution, what role should federal courts play in lawmaking? Which phrase best defines the term policy? He is now 45 and deposits his savings into a bank. Business. True or False: Portugal ensuring that laws do not violate the Constitution. 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? the loanable funds market. 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? Which of the following best describes the cause effect chain of contractionary monetary policy? What was historically significant about the Brown v. Board of Education decision, a product of the Warren Court? Why? When the Fed adjusts its interest rate, it directly influences consumer saving. the maximum amount by which the U.S. money supply can grow as a result of the family deposit. Which statement about executive orders is accurate? What is the value of this expansionary gap? (round to one decimal place) Reserves - In 2007, the Federal Reserve lowered interest rates in order to stimulate the economy. - Banks decide to keep some excess reserves on hand. Classify each of the variables listed by the policy's short run effect upon them. The national objectives of the Federal Reserve include promoting economic growth, full employment, stable prices, and moderate interest rates. With adaptive expectations, what is the inevitable consequence of an active, expansionary monetary policy in the short and long run? -Comprised of the Board of Governors and five regional bank presidents, Classify each of the tasks according to whether or not they are tasks of the Federal Reserve. 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. It creates inflation. Which of the following statements is FALSE regarding the government's fiscal policy toolkit? After the repairs, the decision was made to see if the number of defective products made was still close enough to the long-standing production quality. Money represents anything that can be exchanged for goods and services or the: Money has three roles in an economy. They must fall within the powers assigned to presidents by the Constitution. During the press conference after the meeting, a reporter asks you to explain what OMOs are and how you will use them to increase the money supply. the decision to increase the budget will depend on whether members are using the indoor facility at least two times a week. Which earlier social engineering program directly influenced Johnson's initiatives? The difference between an economy's actual and potential output. It increases federal spending on infrastructure. State laws. Which earlier social engineering program directly influenced Johnson's initiatives? The following table describes the aggregate demand curve, where real GDP is expressed as the percent deviation from potential GDP and inflation is expressed as a percentage: Real GDP 2.0 1.0 0.0 -1.0 -2.0 Inflation 0.0 X % 3.0 4.0 5.0 7.0 9.0 Due to a price shock, inflation increases by 2%.