ECON 2 Lecture Notes - Lecture 3: 1973 Oil Crisis, Aggregate Supply, Aggregate Demand

75 views2 pages

jadefox251

3 Sep 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

sky.h.kim and 37594 others unlocked

ECON 2 Full Course Notes

Verified Note

21 documents

Document Summary

Monetary and fiscal policy monetary printing money central bank federal bank buys debt, lending money market for money (price of money = interest rate vs. supply of money) buy debt shift supply curve to right. Money equilibrium fiscal gov"t - tax (revenue), debt market affects spending (increase spending) Aggregate demand and supply more aggregate demand, stimulate economy (expansionary) print less money (less aggregate supply), decrease economy hold taxes constant, debt increase, increase spending. Gdp = c (consumer) + i (investors / firms) + g (gov"t) + nx consumption and investment held constant gov"t spending increases so gdp increases. Gdp = c (consumer) + i (investors / firms) + g (gov"t) + nx consumption and investment held constant spending constant, decrease taxes, more money in consumers and firms reduce revenue (taxes), more debt. Gdp increase = c (consumer) increase + i (investors / firms) increase + g (gov"t) + nx income and expenditure views of gdp.

Related Questions

5. Fiscal policy is enacted through changes in

A. interest rates and the price level.

B. the supply of money and foreign exchange.

C. unemployment and inflation

D. taxation and government spending.

6. In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inflation. If the MPS is 0.25, then it could

A. increase taxes by $16 billion.

B. increase taxes by $24 billion.

C. decrease government spending by $10 billion.

D. decrease government spending by $16 billion.

7. If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement

A. contractionary fiscal policy.

B. no change in fiscal policy.

C. expansionary fiscal policy.

D. countercyclical fiscal policy.

8. Most economists believe that fiscal policy is:

A. better than the monetary policy for "fine-tuning" the economy.

B. better than the monetary policy for month-to-month stabilization.

C. not as good as the monetary policy for month-to-month stabilization.

D. not very good at pushing the economy in a particular direction.

9. An increase in the legal reserve ratio

A. increases the money supply by increasing excess reserves

B. decreases the money supply by decreasing excess reserves

C. increases the money supply by decreasing excess reserves

D. decreases the money supply by increasing excess reserves

10. The discount rate is the rate of interest at which

A. Federal Reserve Banks lend to commercial banks

B. savings and loan associations lend to some builders

C. Federal Reserve Banks lend to large corporations.

D. commercial banks lend to large corporations

11. Which of the following actions by the Fed most likely increase commercial bank lending?

A. raising the reserve ratio

B. increasing the federal funds rate target

C. reducing the interest paid on excess reserves held at the Fed

D. selling bonds to commercial banks and the public

12. Assume the economy is operating at less than full employment. An expansionary monetary policy will cause interest rates to ______, which will ______ investment spending.

A. decrease; decrease

B. decrease; increase

C. increase; increase

D. increase; decrease

sapphirecrow883

In an effort to move the economy out of a recession, the federal government would engage in expansionary economic policies. Respond to the following points in your paper on the actions the government would take to address expansionary fiscal and monetary policies:

Expansionary Fiscal Policy:

Explain the actions the federal government would take while engaging in expansionary fiscal policy in terms of the following:

The necessary change in taxes and government spending,

The effect on aggregate demand, GDP, and employment.

Expansionary Monetary Policy:

The three tools the Federal Reserve Bank (The Fed) uses when conducting monetary policy are the required reserve ratio, the discount rate, and open market operations.

Explain the actions of the Fed in regard to the three tools.

When the required reserve ratio is increased or decreased

When the discount rate is increased or decreased

Buying or selling government securities when conducting expansionary monetary policy

Explain how these actions would affect the money supply, interest rates, spending, aggregate demand, GDP, and employment.

raspberrygoose799

(Monetary Policy and an Expansionary Gap) Suppose the Fed wishes to use monetary policy to close an expansionary gap.

a. Should the Fed increase or decrease the money supply?

b. If the Fed uses open-market operations, should it buy or sell government securities?

c. 10. Determine whether each of the following increases decreases, or remains unchanged in the short run: the market interest rate, the quantity of money demanded, investment spending, aggregate demand, potential output, the price level, and equilibrium real GDP.

maroonchimpanzee676

ECON 2 Lecture Notes - Lecture 3: 1973 Oil Crisis, Aggregate Supply, Aggregate Demand

ECON 2 Full Course Notes

Document Summary

Get access

Related Documents

ECON 2 Lecture Notes - Lecture 1: Menu Cost, Nominal Rigidity, Aggregate Demand

ECON 2 Chapter Notes - Chapter 20: Financial Institution, Nominal Rigidity, Investment Banking

ECON 2 Chapter Notes - Chapter 17: Loanable Funds, Menu Cost, Fallacy

Related Questions