Question

1. Within the context of the circular flow of wealth, when households and businesses interact in the goods and services markets, mone

Group of answer choices

a. is flowing toward households

b. is not used at all

c. is flowing toward businesses

d. is not exchanged

e. is flowing to both businesses and households

2. Contractionary Monetary Policy would cause which of the following to happen in the short run?

1. A decrease in GDP
2. An increase in the price level
3. An increase in the interest rate

Group of answer choices

a. 2 and 3

b. 1 only

c. 1, 2, and 3

d. 1 and 2

e. 3 only

f. 1 and 3

g. 2 only

3. What interest rate do banks charge each other to borrow money over night?

Group of answer choices

a. the prime rate

b. the discount rate

c. the federal funds rate

d. the U.S. Treasury Bill rate

e. the U.S. Treasury Bond rate

4. Why is the effect of saving so controversial to economists?

Group of answer choices

a. sometimes increasing the savings rate is good for the economy and sometimes it is bad but it is always unpredictable.

b. increasing the savings rate always has an unambiguously negative effect on the economy

c. decreasing the savings rate may hurt the economy in the short run but help it in the long run

d. increasing the savings rate always has an unambiguously positive effect on the economy

e. increasing the savings rate may hurt the economy in the short run but help it in the long run

PLEASE ANSWER ALL 4 MULTIPLE CHOICES, LIKE CHEGG SUGGESTS. DONT WANT TO MARK INCOMPLETE.

Answer 1

1 when households and businesses interact in the goods and services markets, money “is flowing to both businesses and households”

In 2 sector model households receive factor payments and pay to businesses for goods and services

2 Contractionary Monetary Policy would cause “A decrease in GDP and an increase in the Interest rate”

Any contractionary monetary policy action like increase in interest rate will decrease the Aggregate Demand in the economy.

3 Answer is “the federal funds rate”

The bank charge rate to each other for overnight loans , called Federal Funds rate which is set by Federal Reserve

4 The answer is “increasing the savings rate always has an unambiguously negative effect on the economy”, because more savings means less consumption and thus it hinder the output in the economy.