which statement best describes contractionary monetary policy? which statement best describes contractionary monetary policy?

the loanable funds market. What is the leakage-adjusted money multiplier? When inflation is low stable high , the Fed aims to slow the economy. A recent example of expansionary monetary policy was seen in the U.S. in the late 2000s during the Great Recession. a. There is an accompanying Practice Book and Teacher's Resource CD-ROM available separately. - Investment spending What is Ionia's inflation gap? The following table describes the aggregate demand curve, where real GDP is expressed as the percent deviation from potential GDP and inflation is expressed as a percentage: Real GDP 2.0 1.0 0.0 -1.0 -2.0 Inflation 0.0 X % 3.0 4.0 5.0 7.0 9.0 Due to a price shock, inflation increases by 2%. Phil Frugal has been saving his pennies since he was five years old. B. Based on orders received and forecasts of future demand, it is estimated that the demand (in units) for the next four seasons is: Fall 10,000; Winter 8000; Spring 7,000; Summer 12,000. The following statements are true about contractionary policy, except for option 2. since monetary policy shifts the aggregate demand curve, it was not able to deal with the aggregate supply issues that led to the Great Recession. Year Actual Inflation rate Which of the following is a possible explanation as to why this policy failed to restore the economy to long- run equilibrium. Among the roles that money serves in an economy, money is considered a unit of account. Given that the US dollar has depreciated, the aggregate demand in the united states should ____. This raises the interest rate, which The Federal Reserve (Fed) has very little effect on the money multiplier. Using Table 37.1 and your knowledge of macroeconomics, identify the views on macro theory and policy you would want your appointees to hold. Which of these represents the federal government's first intervention in how U.S. businesses operate? B. According to Keynesian economists, if policymakers thought the economy was headed into a recession, what action would be most appropriate? True or False: - The Federal Reserve decreases the discount rate Where do the bills that are introduced to Congress originate? Monetary policy consists of the actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects . the maximum amount by which the U.S. money supply can grow as a result of the family deposit. securities, which results in a $2000 billion decrease in the money supply. This agency was founded by Franklin Roosevelt in response to the stock market crash of 1929. The Fed (1) ____________ controls the money supply through open market operations. B. Money represents anything that can be exchanged for goods and services or the: Money has three roles in an economy. 1. When the economy is growing too slowly (recession) or too quickly (high inflation), the two approaches the government can use, according to economists, include which of the following? When the AD and the SRAS intersect to the left of the vertical LRAS, economists call this: What is the size of this contractionary gap? (a) expansionary monetary policy that effectively removes the economy from a recessionary gap; (b) expansionary monetary policy that is destabilizing; (c) contractionary monetary policy that effectively removes the economy from an inflationary gap; and (d . - Raises the interest rate The new training method will allow these low-skill workers to quickly and cheaply acquire valuable skills that will then place them in better-paying jobs. Also note when the value of the good or service is included in GNP but not in GDP. It involves a change in the size of the money supply. Monetary policy is the best way to influence economic growth. Contractionary fiscal policy features an increase in taxation and/or a decrease in spending in order to attempt to keep prices from rising too quickly. d. Samples of 500 pieces were selected at random, and the defective rate was found to be 0.025%0.025 \%0.025%. This lowers the interest rate, which provides a larger incentive for firms to invest. Which public health and safety agency would be most likely to investigate the safety of a new over-the-counter medicine? Which one of the following statements is correct? Which goal of foreign policy in included in all the other goals? Which program or agency accounts for the greatest amount of discretionary spending by the United States federal government? 25. During the press conference after the meeting, a reporter asks you to explain what OMOs are and how you will use them to increase the money supply. b. - The equilibrium interest rate, What are the results of a contractionary monetary policy, which intends to slow down the economy, and what are not? Generally speaking contractionary monetary policies and expansionary monetary policies involve changing the level of the money supply in a country. Which of the following statements best describes monetary policy during the Great Recession? Which of the following best describes how contractionary monetary policy affects the aggregate demand curve in the aggregate demand-aggregate supply model? Recessions generally occur when there is a widespread drop in spending (an adverse demand shock).This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale . Refer to the following figure to answer the questions that follow. Business Economics Classify the actions described as examples of expansionary monetary policy (intended to stimulate the economy), contractionary or restrictive monetary policy (meant to slow down the economy), or not an example of monetary policy. - Price level, Suppose that a central bank pursues expansionary monetary policy by purchasing bonds. Which of the following statements best describes the use of fiscal policy during a recession? Higher disposable income, higher consumption, higher real GDP, lower unemployment. The Taylor rule helps the chairman to determine the target: Calc. So, A. an increase in the pace of domestic GDP growth. True or False: Which of the following policies is a component of supply-side fiscal policy? Which phrase best defines the term lobbyist? Change ($) = ? The term liquidity trap describes a macroeconomic scenario in which: low interest rates cause people to hoard money, making output and employment stagnate. You have just been elected president of the United States, and the present chairperson of the Federal Reserve Board has resigned. Change ($) = ? Output in the short-run is below the potential output of the economy. -to protect constitutional rights, safety, and fairness -to ensure that property rights are protected Bill of 1944? In the short run, ____________ prices adjust. - A reduction in the occurrences of rampant inflation, Suppose that you are employed as an advisor to the central bank. Loans will become cheaper and the money supply will increase. Smaller overall progressivity in the tax code. Which form of foreign aid involves many nations sharing a common goal and jointly contributing to a common fund? Investment is a Which of the statements best describes the monetary rule, as proposed by the economist Milton Friedman? Contractionary monetary policy is the opposite of expansionary monetary policy. Beginning in January, a person plans to deposit $100\$ 100$100 at the end of each month into an account earning 6%6 \%6% compounded monthly. Contractionary Monetary Policy. Correct answers: 2 question: Deficiencies in which vitamin are the most prevalent worldwide? Fiscal policy involves the use of _____ to influence _____. Label the scenarios with the type of monetary policy lag represented in each. Each year taxes must be paid on the interest earned during that year. Which of the following is true regarding capitalism and communism? Which is true about actual economic output during different times of the business cycle? b. According to the figure, contractionary monetary policy will cause an economy that is initially at full-employment output to go from equilibrium __________ to equilibrium __________ in the short run. inflation is kept in check in the long run by keeping the growth of M1 and M2 on a steady path. Select the proper policy recommendation or economic prediction for each of the following scenarios. The demand for physiotherapists, on the staffs of pro sports teams. In this graph, where can actual economic output be found? Increase government spending, lower taxes, or raise transfer payments. This raises the interest rate, which provides a lesser incentive for firms to invest. Keynesian (intervene) and Classical (do nothing). Become familiar with the notions of "liquidity trap" and "credit rationing." - The central bank sells bonds on the open market. - The central bank increases the money supply. That's between 2% to 3% a year. According to the permanent income hypothesis, which situations would result in an immediate increase in consumer spending, which would result in an immediate decrease in consumer spending, and which would result in no change in consumer spending? a. Australia's commemorative $10 banknote is an example of ________ money. c. Section 11(c) of the OSH Act. His pennies total $5000. How much can a bank lend from an initial 1k deposit? Banks in Ruritania have a required reserve ratio of 5%. How does it affect the accounting equation? ANSWER - E Which of the following best describes how contractionary monetary policy affects the aggregate demand cu. - Distributes coin and currency A company has been running an assembly line with 97.42%%97.42 \% \%97.42%% of the products made is acceptable. The gender information also is included in the questionnaire. Which of the following tax codes is most progressive? a. Elastic. 2. increase Which of the following is true regarding the effects of an expansionary monetary policy? 2. Which of the following statements best descrbes the impact of this event on the stock market? component of aggregate demand, so this shifts aggregate demand to Injecting new money into the economy eventually causes: As the prices of goods and services decrease, the value of money: What did the Federal Reserve do in response to the Great Recession? The ABC Toy Company makes a few types of toy cars on one of its production line. 2012 3% Central banks have four main monetary policy tools. To enforce the rule of the law, but also ensure Congress was not creating laws or policies that were in direct violation of the rights afforded by the Constitution. The Federal Reserve was established by the U.S. Constitution in the late 1700s. Which phrase best defines the term lobbyist? Which resource management agency would most likely set guidelines for oil pipelines and windmills? What does a contractionary gap indicate about output in the short-run? The SRAS curve shifts rightward. Which of the following is a tool that the U.S. president can use on his or her own to affect foreign policy? - An important policy tool for stabilizing fluctuations in the business cycle Which statement best describes monetary policy. 2003-2023 Chegg Inc. All rights reserved. securities, which increases the amount of reserves in the banking systems and fuels deposit expansion. Which of the following is NOT an example of an automatic stabilizer? The choices offered in the questionnaire are science, business, and other. 2. When a company issues stock, it is agreeing to share the company's __ and __ with the investor. Which organization is the newest cabinet-level department in the United States Government? Classify each of the variables listed by the policy's short run effect upon them. Which form of foreign aid involves many nations sharing a common goal and jointly contributing to a common fund? - Increases investment spending What does the word 'fiscal' refer to when discussing fiscal policy? Which statement about executive orders is accurate? Monetary policy is the domain of the U.S. Federal . People have different ways of handling What is the appropriate contractionary fiscal policy response when inflation goes from a 3% to 10% annual rate and real GDP rises from 2% to 10%? component of aggregate demand, so this shifts aggregate demand to It is sometimes above its long-run potential. Lower tax rates on interest earned from savings. This entity enforces rules and laws related to the stock market. In the long run, the decrease in the money supply will cause the price level in the economy to __________ and real GDP to ___________. Select the proper policy recommendation or economic prediction for each of the following scenarios. 30 seconds . d. Contractionary monetary policy directly puts money into the - The Federal Reserve increases the percentage of deposits that commercial banks are required to keep in their vaults, Contractionary (restrictive) monetary policy, Classify the actions described as examples of expansionary monetary policy (intended to stimulate the economy), contractionary or restrictive monetary policy (meant to slow down the economy), or not an example of monetary policy. a.) The economy, therefore, cannot be stimulated beyond this point. . Significant revisions to quarterly GDP data and monthly unemployment data delay the identifications of the start of a recession. M1 is the narrowest definition of the money supply. Suppose that the Fed engages in an expansionary monetary policy, which reduces interest rates. She is especially excited because she has been saving money each week in her piggy bank at home so that she can afford a trip to Florida next summer. Investment is a True or False: 1. indirectly - $500. C. An increase in the real interest rate is necessarily accompanied by either an increase in the nominal interest rate, an increase in the inflation rate, or both. Principles of Economics 8th Edition ISBN: 9781305585126 (3 more) N. Gregory Mankiw 1,337 solutions Principles of Microeconomics 6th Edition ISBN: 9780538453042 (8 more) N. Gregory Mankiw 791 solutions Essentials of Investments 8th Edition ISBN: 9780077246013 Alan J. Marcus, Alex Kane, Zvi Bodie 667 solutions Contemporary Economics SURVEY . Contractionary monetary policy directly puts money into the 1. He is now 45 and deposits his savings into a bank. One advantage of polymer banknotes is that they dramatically reduce counterfeiting. Expert Answer 100% (15 ratings) In the short run, some prices are inflexible. Which of the following ensures the right of workers to seek safety and health on the job without fear of punishment? the money multiplier for the U.S. in this ex. As it relates to the European Union, what is the ECB? the military Which phrase best describes the economy of the former Soviet Union and present-day North Korea? How do lag times differ between monetary policy implementation and fiscal policy implementation? b) Contractionary monetary policy can help the government crowd out the private sector by increa Which of the following statements are true? Which type of agency would be most likely to focus on protecting the nation's borders? If the economy is at potential output prior to the . ensuring that laws do not violate the Constitution. Who does the U.S. Constitution assign sole responsibility for the budget and federal taxation? Fiscal policy is determined by the Bank of Canada, while monetary policy can be determined by either Parliament or the Bank. True or False: Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. President Lyndon B. Johnson created a set of programs that were known as the Great Society. Assume a required reserve ratio of 10%. The Fed can _____________ the money supply by lowering this rate. You reply that: OMOs are the purchase and sale of gov. A contractionary policy is a type of monetary policy that aims to decrease the money supply, reduce spending, and lower inflation. Refer to the following figure to answer the questions that follow.According to the figure, contractionary monetary policy will cause an economy that is initially at full-employment output to go from equilibrium __________ to equilibrium __________ in the short run. 6) Suppose you are in charge of sales at Novartis (the largest pharmaceutical compa-ny) and your company sells a drug that causes bald men to grow hair. Central banks can use monetary policy to: make it easier for people and businesses to borrow. Fresh fish is not an effective form of money. The Federal Reserve, which maintains reserve banks across the United States, is responsible for monetary policy. 1. Which risk do they run each day at