Please answer question 2. From this 1. The growth rate of the money supply in a particular year was 8.5%. What wasthe growth rate of real GDP if the inflation rate in the same year was 4%?2. During a recession, the Fed enacts countercyclical policy, by changing thequantity of reserves. To fight recession, how will the Fed adjust the quantity ofreserves in the market (to S₁ or S₂)? Explain how the Fed can operationalizethat.Fedfunds rate ()SI1II1TI1111I||II1111SoII11I1II11I11JII11+IIII2DQuantity of reserves3. Explain why the zero lower bound is a problem for monetary policy. If there's arecession and the Central Bank is at a zero lower bound, what monetary policiescan it pursue to stimulate the economy?

Recession is that phase where the prices of all goods and services experiences a downfall. It's more…

2. During a recession, the Fed enacts countercyclical policy, by changing the quantity of reserves. To fight recession, how will the Fed adjust the quantity of reserves in the market (to S₁ or S2)? Explain how the Fed can operationalize that. Fed funds rate () S. So S. D Quantity of reserves

2. During a recession, the Fed enacts countercyclical policy, by changing the quantity of reserves. To fight recession, how will the Fed adjust the quantity of reserves in the market (to S₁ or S2)? Explain how the Fed can operationalize that. Fed funds rate () S. So S. D Quantity of reserves

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 1CQQ

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1. Suppose the fed were to reduce sharply its discount rate from nine percent to five percent, catching the financial community by surprise. Explain the consequences for this measure for: a. reserves b. the money supply c. interest rates
Suppose that this year’s money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion.a. What is the price level? What is the velocity of money?b. Suppose that velocity is constant and the economy’s output of goods and services rises by 5 percent each year. What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant.c. What money supply should the Fed set next year if it wants to keep the price level stable?d. What mone
11. People view cell phone and its charger as complements to one another. If the price of cell phone increases, economists would expect: O The demand for charger will not change. O The demand for charger to increase. O The quantity of cell phone demanded to increase O The demand for charger to decrease. 12. Which one is not the role of the Fed? O The Fed also acts as a bank to the American citizens with net wealth is larger than 10 million dollar. O The Fed also acts as a bank to other banks by clearing checks, making electronic payments, and providing the currency that American's need and use every day. O The Fed also helps to supervise and regulate the nation's banks and works to promote a stable financial system for consumers, communities, and businesses The Fed implements monetary policies that promote maximum employment and m stable prices.
In 2019, an economy produces wheat only and has enough labor, capital, and land to produce 500bushels of wheat (Y or real GDP). Price of wheat and money supply are $2 per bushel and $1,000respectively. In 2020, the central bank increases money supply by $ 1040. Suppose both the velocity ofmoney (V) and the amount of wheat produced remain unchanged. a. Compute the velocity of money and nominal GDP in 2019. b. Calculate inflation rate in year 2020. c. Use a well-labelled money supply-demand diagram to illustrate and explain what happen to the pricelevel and the value of money after such money injection?
In an economy where the central bank implements negative interest rates as a monetary policy tool, what is the most likely short-term impact on consumer savings behavior and bank profitability? A. An increase in consumer savings as people seek to safeguard their money and a rise in bank profitability due to increased lending. B. A decrease in consumer savings as the incentive to save diminishes and a decrease in bank profitability due to lower interest margins. C. No significant change in consumer savings behavior but an improvement in bank profitability due to lower borrowing costs. D. A shift in consumer investment towards riskier assets and challenges in bank profitability due to compressed interest margins. Please don't use chatgpt it is giving wrong answer and please provide valuable answer
4. The U.S. Federal Reserve responded to the 2020 COVID-19 lockdowns by imple-menting an expansionary monetary policy, causing M2 money supply to rise from $15.33 trillion in December 2019 to $18.3 trillion in July 2020. Over the same period, real GDP fell by 5.1 percent. (b) Why would you not expect inflation to be immediate, following the monetary ex-pansion? 5. Inflation can cause increased wealth inequality through the Cantillion Effect. Essentially, this means that expansionary monetary policy benefits those who are initially given new money (usually those who are rich and well-connected), while the rest of the population suffers the effects of inflation. Using the quantity theory of money, explain why this is the case.
Monetary policy and fiscal policy scavenger hu nt In a 25 year perio d, the CPIhas shown that the cost of a basket of go ods has ri sen by 150%. What action can the Federal Reservetake on reserve requirements to help reverse this trend? Federal Reserve polici es haveled to an increasein the real GDP. What action did the Fed probably take on interest paid on requi red and excess reserves to achieve this? The unemploymentrate has risen and the pricelevel and real GDP have fallen. What are four po ssible actio ns the Federal Reservehas taken to cause thi s?
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1- If an income elasticity of money demand is 3/4 and income increase 8%, by about how much does the price level change? 2- If real GDP is $4billion, the price level is 1.25 and the nominal money stock is $500 million then velocity is? 3- Suppose velocity is 3, real output is 900 and the price level is 1.5 what is the level of real money demand in this economy? 4- If the interest elasticity of money demand is -0.1 by what percent does money demand change if the nominal interest rate rises from 2% to 3%?
3. An open-market sale of government bonds by the Fed results---------in reserves and ---------in the supply of money. a) an increase; a decrease (b) a decrease; a decrease (c) an increase; an increase (d) a decrease; an increase
. What is the opportunity cost of holding money? How is k related to the velocity of money? s. Use the Quantity Theory of Money to explain how long run inflation occurs. If the Federal Reserve Bank wishes to keep the inflation rate at zero percent, at what rate should the money supply grow? Why?
Explain the linkages in the causal chain when the Fed conducts a contractionary monetary policy. Explain how the FED would use the THREE tools available for Monetary policy. Make sure you include all 5 steps outlined below. 1)List the three tools and how specifically they would change. 2)How the actions stated above would effect the money supply. 3) How this change in the money supply will effect the interest rate. 4) How #3 will effect the rate of investment. 5) How this will effect real GDP/AD Remember, this is an essay question. Write in complete sentences. Take the time to proof-read for clarity.