Question

What is the goal of expansionary monetary policy, and how does it work in the short run?

Answer #1

It works by increasing the money supply through

a) decrease in bank rate or

b) decrease in reserve ratio or

c) purchase of governmetn securities

This leads to higher money supply resulting in lower interest
rate.

The lower interest rate leads to higheer investment, thus shifting
out the AD curve.

Given constant AS curve, shift out of AD curve leads to increase in
output.

Expansionary monetary policy is used to decrease unemployment
and increase real GDP. This policy works in the short run, but is
it effective in the long run? Place the following events in order
from first to last.
The Fed invokes expansionary monetary policy by increasing money
supply.The AD curve shifts rightward.Resource prices adjust.SRAS
shifts to the left.The economy moves to a new long-run
equilibrium.

Expansionary monetary policy has short run consequences through
its impact on ___________; and long run consequences through its
impact on _________.
fiscal policy and taxes
consumption and investment
saving and investment
interest rates and output

In the short-run, the effect of an expansionary monetary policy
on the output level is very large when money demand is relatively
insensitive to the changes in the interest rate. Do you agree or
disagree with this statement? Explain your answer using appropriate
diagram(s).
Thanks.

expansionary monetary policy ________ real interest rates and
________ output in the short run, thereby ________ stock
prices.
a. lowers, rise, lowering
b. raises, lowers, loweing
c. lowers, raise, raising
d. raise, raise, raising

Suppose that in a closed economy the fiscal policy is
contractionary and monetary policy is expansionary, and the central
bank is setting the interest rates (LM is horizontal). Graphically
analyze this policy mix by using IS-LM diagram. What will be the
impact on real income and on interest rate in the short run? What
will be the impact of this policy mix on the economy in the medium
run? Show by using an AD-AS-LRAS diagram.

Expansionary policy consist of either monetary policy or fiscal
policy. Explain expansionary monetary policy and its effect on
Aggregat Demand (with diagram)

How
does monetary policy work? How is it done?

What monetary tools would you use in case of an expansionary
monetary policy? What steps should be taken to implement an
expansionary fiscal policy?

What, exactly, is “monetary policy”? Please describe the two
types of monetary policy. 2. “Expansionary” monetary policy has
been described as a complex 5 step process. Please take me through
each step, starting at step 1, then moving through steps 2, 3, 4,
then step 5, and describe each step in detail. 3. There are, in
theory, four “links” between the 5 steps. Please describe them for
me. 4. a) In theory, how could Link A be weak? How could...

1) Briefly describe how an expansionary monetary policy policy
can be depicted on the graph of Demand Vs Supply for goods and
services (output for GDP), where the horizontal and vertical axes
are the Quantity (Q) and the price (P) of goods and services,
respectively.
2) Briefly describe how an expansionary monetary policy can be
depicted on the graph of Demand Vs Supply for money, where the
horizontal and vertical axes are the quantity and price of money
respectively. (Remember,...

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