Question

The Fed sets higher interest rate at each price level. -Which ceteris paribus change could have...

The Fed sets higher interest rate at each price level.

-Which ceteris paribus change could have caused the shift?:

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

During an inflationary level, govt. can adopt contractionary fiscal policy(Raising tax rates and decreasing govt. spending) and central bank can have contractionary monetary policy ( raising interest rates and lowering money supply ). These policies can be used with each other or in isolation.

It can be used for Inflation targeting when Central bank sets a target of inflation ( around 2%-4 %). Interest rates are increased/decreased according to this inflation levels.

Hence, aggregate demand shifting to right would have caused interest rates to go up.

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
Widespread fear of depression on the part of consumers. -Which ceteris paribus change could have caused...
Widespread fear of depression on the part of consumers. -Which ceteris paribus change could have caused the shift?:
Ceteris paribus, if the Fed raised the required reserve ratio: Banks could increase their lending. The...
Ceteris paribus, if the Fed raised the required reserve ratio: Banks could increase their lending. The Federal funds interest rate would rise. The size of the monetary multiplier would decrease. The size of the monetary multiplier would increase.
Ceteris paribus, a decrease in the U.S. price level will cause an increase in U.S. exports....
Ceteris paribus, a decrease in the U.S. price level will cause an increase in U.S. exports. an increase in U.S. imports. the aggregate demand curve to shift to the left.
1. Which of the following events would cause a decrease in the equilibrium interest rate in...
1. Which of the following events would cause a decrease in the equilibrium interest rate in the short-run money market? For each event, simply state YES or NO. a. The price level increases, Ceteris Paribus. b. The FOMC conducts open market sales of existing bonds, Ceteris Paribus. c. The aggregate demand shifts to the left, Ceteris Paribus. d. The Fed increases the required reserve ratio, Ceteris Paribus. e. The Fed increases the money supply, Ceteris Paribus. f. The money demand...
A new President and Congress increase personal income taxes. -Inflation: (increase/decrease) -Real GDP: (increase/decrease) Which ceteris...
A new President and Congress increase personal income taxes. -Inflation: (increase/decrease) -Real GDP: (increase/decrease) Which ceteris paribus change could have caused the shift?:
1. To control the rate of change in the price level the Fed would like to...
1. To control the rate of change in the price level the Fed would like to see the money supply growth be contained. They reduce the growth in the monetary base which slows the rate of growth in money supply. In this scenario which one of the following will be called the operating target? A. The monetary base B. The money supply C. The inflation rate 2. To control the rate of change in the price level the Fed would...
According to the law of demand an increase in the price of Pepsi will (ceteris paribus):...
According to the law of demand an increase in the price of Pepsi will (ceteris paribus): A)        increase the quantity demanded of Pepsi. B)        decrease the quantity demanded of Pepsi. C)        increase the demand for Pepsi. D)        decrease the demand for Pepsi. 3 points    QUESTION 7 A change in the demand for beef will most likely be caused by a change in the: A)        price of beef. B)        price of pork. C)        cost of producing beef D)        technology used...
The interest rate effect on aggregate demand indicates that a(n): A. Decrease in the price level...
The interest rate effect on aggregate demand indicates that a(n): A. Decrease in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending B. Decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending C. Increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending D. Increase in the supply of money...
1.The Fed prefers to focus on the interest rate rather than growth in the money supply...
1.The Fed prefers to focus on the interest rate rather than growth in the money supply because a.it does not like to conduct open market operations. b.the money supply is too unpredictable. c.it makes inflation more predictable. d.money demand is too volatile. e.it is easier to fix the interest rate than maintain growth in the money supply. 2. Assume the Fed has complete control over the money supply. If the demand for money were greater than the supply of money,...
Which of the following best describes the "interest rate effect"? An increase in the price level...
Which of the following best describes the "interest rate effect"? An increase in the price level raises the interest rate and chokes off government spending. An increase in the price level lowers the interest rate and chokes off investment and consumption spending. An increase in the price level lowers the interest rate and chokes off government spending. An increase in the price level raises the interest rate and chokes off investment and consumption spending. If the marginal propensity to consume...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT