b) at equilibrium Md = Ms
Y(0.3-i) = 20
=> 100(0.3-i) = 20
=> 0.3-i = 0.2
=> i = 0.1 = 10%
MTv1 4. Discuss how contractionary monetary policy impacts the equilibrium interest rate using the bond market to motivate the change in the interest rate. Explain using the Bond market graph and...
(c) Discuss how contractionary monetary policy impacts the equilibrium interest rate using the bond market to motivate the change in the interest rate.
Discuss how contractionary monetary policy impacts the equilibrium interest rate without talking about bond prices using the graph of the money market equilibrium developed in chapter 4. Please draw it out.
Contractionary Monetary Policy: A) Using the exchange rate market model, illustrate and explain how the monetary policy action identified above may affect the exchange rate. Identify the new equilibrium on the diagram as point B. B) Using the IS-LM model, illustrate and explain how the economy and the unemployment rate may be impacted as a result of the change in the exchange rate in part a. Identify the new equilibrium on the diagram as point B.
because it Monetary policy that decreases the interest rate is called A. contractionary monetary policy, reduces AD. B. contractionary monetary policy; reduces SRAS. C. expansionary monetary policy; increases AD. D. expansionary monetary policy; increases SRAS. QUESTION 11 Other things the same, a fall in an economy's overall level of prices tends to A. raise both the quantity demanded and supplied of goods and services. B. raise the quantity demanded of goods and services, but lower the quantity supplied. C. lower...
2. Explain the following questions regarding monetary policy. 2.1.Discuss the three monetary policy tools of the Federal Reserve. 2.2.Explain how each monetary policy tool can be used to change the money supply and equilibrium interest rate in the U.S. 2.3.Using the IS-LM graph, what will happen to the equilibrium interest rate (i*) and equilibrium GDP (Y*) when the monetary policy action described in Question 2.2 is conducted. 2.4.Using the IS-LM model, explain in which situations such a monetary policy action...
Think about the two types of monetary policy: expansionary and contractionary. Using what you have learned about open market operations, determine whether the noted actions below coincide with expansionary monetary policy or contractionary monetary policy. In a few sentences explain how. Action: Government securities are sold by the Fed. Expansionary Contractionary Action: The federal funds rate decreases. Expansionary Contractionary Action: The money supply increases. Expansionary contractionary
MS Monetary Policy - End of Chapter Problems 8. Suppose that the money market in Westlandia is initially in equilibrium, and the central bank decides to decrease the money supply. In the short run, this decrease in the money supply will the interest rate. Interest rate, r MD In the accompanying diagram, shift the MD and/or MS curves and move the equilibrium point to its new position to illustrate the short-run and long-run effects of the decrease in the money...
1. Using a graph, show the impact of the contractionary monetary policy using Keynesian analysis. 2. To create 3% growth in the economy, monetarists think the money supply should: a) increase by more than 3% yearly b) incr. less than 3% yearly c)incr. at 3% yearly d)decrease 3% yearly e) be constant 3. Use two graphs to depict what would happen If the fed buys a lot more T bonds than it sells, show the effect it will have in...
Question 2 Explain how the effectiveness of contractionary monetary policy (dM Fiscal policy (dg <0) depends on the magnitude of the response of NX to in r or dNX/dr. Make sure to provide your answer with the relevant mathematical equations, and economic interpretation. points) Question Two: Assume the following equations summarize the structure of an economy. с =C, +0.7(Y - T) са = 2,000 - 50 т * 150 + 0.15Y (M/P) 0.3Y - 10r M/P 3,000 2,000 -10r G...
2. Explain transition mechanism for the expansionary monetary policy by using florigen exchange market, bond market, market of money, and AS-Ad model.