ZuoTi.Pro
Question

Suppose the Fed begins carrying out an expansionary monetary policy in order to close a recessionary...

Suppose the Fed begins carrying out an expansionary monetary policy in order to close a recessionary gap. Relate what happens during the next two phases of the inflation-unemployment cycle to the maxim “You can fool some of the people some of the time, but you can’t fool all of the people all of the time.”

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Hi,

Suppose the situation is that of recession, so now an expansionary monetary policy will infuse more cash into the economy, lower interest rates and also increase aggregate demand. This will enhance economic activity and drive up inflation, there will less unemployment, but there is a catch, this is a short run, in the long run, inflation and unemployment are unrelated and the long-run Philips curve explains that which is a vertical line at the natural rate of unemployment.

0 0
Add a comment
Know the answer?
Add Answer to:
Suppose the Fed begins carrying out an expansionary monetary policy in order to close a recessionary...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Question 2 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages...

    Question 2 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages in expansionary monetary policy. The impact of expansionary monetary policy will be to increase aggregate demand, increase prices, and increase real GDP - increase aggregate demand, increase prices, and decrease real GDP increase short-run aggregate supply, decrease in prices, and decrease in real GDP o increase short-run aggregate supply, decrease prices, and increase real GDP Page 2 of 30 Previous Page Next Page

  • Question 28 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages...

    Question 28 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages in expansionary monetary policy. The impact of expansionary monetary policy will be to increase short-run aggregate supply, decrease prices, and increase real GDP increase aggregate demand, increase prices, and increase real GDP increase aggregate demand, increase prices, and decrease real GDP increase short-run aggregate supply, decrease in prices, and decrease in real GDP

  • Suppose that the central bank carries a brief expansionary monetary policy and at the same time...

    Suppose that the central bank carries a brief expansionary monetary policy and at the same time there is a surge in economic activity. As a result of these two facts, it is observed that short-term interest rates increase and that, in equilibrium, agents choose to hold more monetary assets. a) Does this information contradict the expected negative relationship between interest rates and money demand? Explain. b) Explain what happens (and why) in terms of supply and demand for funds in...

  • Suppose the Fed wanted to engage in an expansionary monetary policy. Which of the following should...

    Suppose the Fed wanted to engage in an expansionary monetary policy. Which of the following should it do? a. Increase the reserve requirement ratio. b. Buy bonds on the open market. c. Sell bonds on the open market. d. Lower taxes. e. Increase the discount rate. The interest rate at which banks can borrow funds from the Fed is known as… a. the federal funds rate. b. the discount rate. c. the prime rate. d. the real interest rate. e....

  • 2001, the Fed pursued an expansionary monetary policy and reduced interest rates. At the same time, President Georg...

    2001, the Fed pursued an expansionary monetary policy and reduced interest rates. At the same time, President George W. Bush pushed through legislation that lowered Income taxes. "he accompanying IS-LM diagram describes the situation prior to any such policy changes. Initially the economy is at equilibrium point A. .) Using the line drawing tool, draw a new LM curve to illustrate the effect of an expansionary monetary policy. Property abel your curve. 2.) Using the 3-point curve drawing tool, draw...

  • When easy money policy is used persistently by the Fed, it eventually results in: reduced unemployment....

    When easy money policy is used persistently by the Fed, it eventually results in: reduced unemployment. excessive savings. high inflation. the exhaustion of excess reserves. In 2016, Greece faced another set of hurdles in its ongoing saga of managing its debt. In order for Greece to maintain its obligations under the IMF and European Central Bank bailout packages, it must continue to cut government spending, particularly pensions that have put a strain on the budget. Greece's leaders, meanwhile, have argued...

  • Suppose the Fed decides it needs to pursue an expansionary policy. Assume people hold no cash,...

    Suppose the Fed decides it needs to pursue an expansionary policy. Assume people hold no cash, the reserve requirement is 20 percent, and there are no excess reserves. How would the Fed increase the money supply by $1 million through open market operations? O A. Because the current money multiplier is 5, the Fed would sell $200000 worth of bonds, increasing the monetary base and so increasing the money supply by $1000000 B. Because the current money multiplier is 5,...

  • l 6. Monetary policy and the problem of inflationary and recessionary gaps On the following graph,...

    l 6. Monetary policy and the problem of inflationary and recessionary gaps On the following graph, the economy is producing at point A (grey star symbol), which corresponds to the intersection of the AD, and SRAS curves. The Federal Reserve ("the Fed") is considering whether to intervene in an effort to bring the economy back to its potential. ? LRAS SRAS, 165 160 No Intervention SRAS2 155 150 If Fed Intervenes PRICE LEVEL 145 140 AD2 135 ADA 130 125...

  • Question 1: Inflation and Monetary Policy (12 points out of 20) Here is some data on...

    Question 1: Inflation and Monetary Policy (12 points out of 20) Here is some data on the economy of a certain country. Use this data for all three parts of question 1. M1 Money Supply: $190 Billion Real GDP: $765 Billion    Velocity of M1 Money Supply: 4.3 Question 1a: Right now, what is the rate of inflation in that country? How can you tell? Type your answer and calculations here:    Question 1b: If they want to change the inflation rate...

  • 3. Aggregate Supply Shocks Suppose that a small economy that depends mostly on agriculture experiences a...

    3. Aggregate Supply Shocks Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops. What would the good weather do to the Short-run Aaggregate Supply curve and the Short-run Phillips Curve? a. It would shift both the Short-run Aggregate Supply Curve and the Short-run Phillips Curve b. It would shift both the Short-run Aggregate Supply curve and the Short-run Phillips Curve c. It would shift the Short-run Aggregate Supply Curve...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT