Question

If the federal government runs large deficits it could cause crowding out through interest rates. However,...

If the federal government runs large deficits it could cause crowding out through interest rates. However, the Federal Reserve could try to keep interest rates down by increasing the growth of the monetary base. What will be the long-run result of these two policies?

high inflation and high nominal interest rates

high national debt and low interest rates

low nominal interest rates and low unemployment rate

low unemployment rate and low inflation
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Increasing the growth of monetary base and increasing government expenditure both will shift the aggregate demand curve to the right in the short run. in the long run the economy will adjust for this change in the GDP by shifting the short run aggregate supply curve to the left. This will increase nominal interest rate as well as inflation. Because in both shifts there is an increase in inflation the final outcome will have high inflation and high nominal interest rate

High inflation and high nominal interest rate.

0 0
Know the answer?
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
Similar Questions
Explain how the Federal Reserve’s lowering of interest rates affects the following variables in the short...
Explain how the Federal Reserve’s lowering of interest rates affects the following variables in the short run: household consumption, business investment, real GDP, and the price level. Insert or attach a well-labeled Aggregate Demand/Aggregate Supply graph that would illustrate the effect of a cut in interest rates. What is one macroeconomic problem that could cause the Federal Reserve to become aggressive in raising interest rates? Explain. Describe one issue that could cause the Fed to lower rates? Define the “federal...
. Which of the following are concerns regarding expansionary fiscal policy, i.e. the increase in government...
. Which of the following are concerns regarding expansionary fiscal policy, i.e. the increase in government spending and decreases in taxes a. it will decrease wages b. It will create an asset bubble c. it will cause deflation d. It will increase budget deficits and the national debt 2. Savings Accounts are part of which stock of money? a. M2 b. Monetary base c. All of the above d. M1 3. The main goal of monetary policy is to a....
1.High interest rates might………….purchasing a house or a car but at the same time high interest...
1.High interest rates might………….purchasing a house or a car but at the same time high interest rate might ……………….saving. A)  discourage; encourage B)  discourage; discourage C) encourage; encourage D)  encourage; discourage 2.An increase in interest rates might ………..saving because more can be earned in interest income. A) encourage B) discourage C) disallow D) invalidate 3.   Everything else held constant, an increase in interest rates on student loans ……………….. A)  increases the cost of a college education. B)  reduces the cost of a college education. C)...
I need to check my homework, all I dont need any explaining. Thanks 1. When the...
I need to check my homework, all I dont need any explaining. Thanks 1. When the Fed buys short-term Treasury securities, short-term interest rates: a. fall. b. rise. c. could rise or fall. d. stay the same. 2. Which is NOT a duty performed by the Federal Reserve System? a. manage the nation's payment system b. print money c. regulate the U.S. banking system d. maintain the bank account for the U.S. Treasury 3. If the Fed wants to decrease...
The Federal Reserve Board under the direction of Janet Yellen had kept interest rates at amazingly...
The Federal Reserve Board under the direction of Janet Yellen had kept interest rates at amazingly low levels. What are the benefits and consequences of taking on such action? Do you feel the policy of the Fed raising rates is correct? What are the benefits and consequences of this action? Include in your answer issues as interest rate stimulus, inflation, money supply. Finally state your opinion of whether Janet Yellen and the Fed are correct with current policies correct
If the Federal Reserve decided to raise interest rates, it could sell bonds to lower the...
If the Federal Reserve decided to raise interest rates, it could sell bonds to lower the money supply. buy bonds to raise the money supply. buy bonds to lower the money supply. sell bonds to raise the money supply According to the equation of exchange, if real GDP and money supply stays the same, inflation is always zero. money velocity must stay the same. the rate of inflation equals the rate of change in money velocity. None of the above.
exam3 #12 CBO expects higher​ long-term deficits The Congressional Budget Office​ (CBO) says the national debt...
exam3 #12 CBO expects higher​ long-term deficits The Congressional Budget Office​ (CBO) says the national debt is on an upward path and will hit 122 percent of GDP in 2040. Healthcare programs and Social Security benefits are the large drivers of spending over the coming decades. ​Source: The Wall Street Journal​, July​ 12, 2016 If the government decided to slow the growth of debt by cutting transfer payments and raising taxes by the same​ amount, how would this fiscal policy...
1) When discussing wages, incomes and interest rates you always want to focus on the ...........
1) When discussing wages, incomes and interest rates you always want to focus on the ........ when making comparisons. a. Nominal Value b. Real value c. both are needed d. none of the above 2) When there is a decrease in the interest rate you can expect to see a. increase in investment b. decrease in spending c. increase in savings d. both increase in investment and increase in savings 3. A decrease in the supply of oil ( an...
. The term stagflation refers to an economy: a.with hyperinflation, but low unemployment b.with low inflation,...
. The term stagflation refers to an economy: a.with hyperinflation, but low unemployment b.with low inflation, but expanding capital stock. c. that is experiencing stagnated technology growth, but no inflation . d. that is not growing, but has inflation. Stagflation is the result of: a. a decrease in long-run aggregate supply. b. an increase in short-run aggegate supply. c. an increase in long-run aggregate supply. d. a decrease in short-run aggregate supply. Which of the following events could cause stagflation?...
1. Which of the following is not a goal of monetary policy? A. High employment B....
1. Which of the following is not a goal of monetary policy? A. High employment B. Economic growth C. Low inflation D. An unemployment rate as close to zero as possible 2. What is the primary long run goal of monetary policy? A. Price stability B. Economic growth C. Low unemployment D. A stable dollar 3. The most important characteristic of a policy(operating) instrument Is that it A. Is observable and measurable B. Is controllable C. Has a predictable impact...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT