Homework Answers
Answer)
- Monetary policy is set by central banks to control liquidity in market by various tools such as interest rates,bonds etc.,idea is to target inflation in economy and manipulate money supply in economy using these tools,thus option (c) Manipulate the money supply in the economy by changing interest rates on loans to bank,making private banks reserve a percentage of their deposits and buying/selling bonds in the open market is correct option.
- Fiscal policy is associated with government spending and taxes to boost economy or increase revenue,thus it uses government spending and taxes as its tools to manipulate economy,which is stated in option (a),thus option (a) Manipulate the money supply in the economy by changing taxes and government spending is the correct answer.
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• if the velocity of money is 2, the money supply in this
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trillion/ $45trillion /$54 trillion)
•because ( the federal reserve controls M/ velocity is assumed
to be constant/ the AD curve is downward sloping ), the percentage
increase in the price level Is ( less then/ the same as/ greater
then ) the percentage increase im the money supply. the illustrates
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