Homework 5 Economic For Managers, Pearson
TQ#1. Explain which of the following are counted as part of the money supply (MI):
a) Checking account deposits.
c) Saving account deposits
d) Government books.
TQ#2. What is a fractional reserve banking system? What is the role in the monetary side of the economy?
TQ#4. What are the three tools the Federal Reserve uses to change the money supply and interest rates in the economy? Which of these tools is most important and why?
TQ#6. In each of the following cases, explain whether the statements are true or false:
a) If the real money demand is greater than the real money supply, interest rates must rise the reach equilibrium in the money market as people sell bonds to obtain more money.
b) The federal government’s control of the money supply, which influences rates, is the primary tool that tools that policy makers use to impact the macro economy.
c) A decrease in the reserve requirement decreases the money supply because banks have fewer reserves.
d) The real money demand curve shows how households and businesses change their spending in response to changes in the interest rate.
e) Both an increase in the nominal money supply by the Federal Reserve and an increase in the price level will cause the real money supply curve to shift to the right.
AQ#1. In current business publications or on the Federal Reserve Web site (www.federalreserve.gov), find the press release from the most recent meeting of the FOMC. What is the targeted federal funds rates? How does the FOMC evaluate the balance of risks between its goals of price stability and sustainable economic growth?
AQ#3 On the Federal Reserve Web site ( www.federalreserve.gov), find the version of the Beige Book that summarizes economic conditions in your Federal Reserve district. Summarize those conditions and relate them to current FOMC policy.
TQ#2. Explain how each of the following changes would shift the aggregate expenditure function (Chapter 12) and the aggregate demand curve (Chapter 14):
a) An increase in personal taxes.
b) An increase in expected profits and business confidence
c) A decrease in the level of foreign GDP or real income
d) A decrease in the nominal money supply by the Federal Reserve
TQ#4. Evaluate whether each of the following statements is true or false, and explain your answer:
a) The short run aggregate supply (SAS) curve slopes upward because households spend more as their incomes increase.
b) The long run aggregate supply curve can never shift.
c) Either a decrease in the nominal money supply by the Federal Reserve, all else held constant, or an increase in the price level, all else held constant, will shift the aggregate demand (AD) curve to the left.
d) The Keynesian portion of the short run aggregate supply (SAS) curve would be relevant during a recessionary situation.
e) Stagflaction occurs when the aggregate demand (AD) curve shifts out on the upward sloping portion of the short run aggregate supply (SAS) curve.
AQ#1. Describe how the following statement relate to the AD-AS model:
a) The Fed has bought more than $2 trillion of Treasury and mortgage bonds to stimulate the economy.
b) The above actions by the Fed may cause inflation to rise to levels that most would consider unacceptable.
c) The Fed expected a weaker dollar to help increase exports.
d) Businesses already have ample access to cheap credit and are reluctant to borrow, hire, and invest for other reasons.
- : 10/06/2017
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