Question

Which one of these policies is the Fed most likely to follow if employment is well...

Which one of these policies is the Fed most likely to follow if employment is well above the full level of employment and inflation is moderately high?

Select one:

a. Decrease the Required Reserve Ratio

b. Buy government bonds

c. Target a lower Federal Funds Rate

d. Increase income tax

e. Sell government bonds

2.

Suppose that the Price level = 120, Supply of Money = $20 billion, and Real GDP = $4 billion. What does the velocity of money equal?

Select one:

a. 8

b. 12

c. 15

d. 20

e. 24

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. Answer: e. Sell government bonds

If employment is well above the full level of employment, it is called inflationary gap (Excess demand since AD>AS). During this situation there is excess money circulation in the economy. To correct this, the Fed sells government bonds in the open market, By doing this money supply is controlled and full employment equilibrium is reached.

2. Answer: e. 24

(P) Price level = $120

(M) Supply of Money = $20

(Y) Real GDP = $4

(V) Velocity = ?

V = 24

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
Suppose that the Price level = 120, Supply of Money = $20 billion, and Real GDP...
Suppose that the Price level = 120, Supply of Money = $20 billion, and Real GDP = $4 billion. If the velocity of money stays the same but Real GDP increases by 20%, what will happen to the price level if the supply of money increases by $10 billion? Select one: a. It will increase to 125 b. It will increase to 132 c. It will increase to 144 d. It will increase to 150 e. It will increase to...
If the economy is full employment, an increase in aggregate demand will most likely lead to:...
If the economy is full employment, an increase in aggregate demand will most likely lead to: a reduction in the general level of prices an increase in unemployment an increase in real output, but not in prices an increase in prices, but not in real output. In order to reduce the rate of inflation in a rapidly growing, full-employment economy, it would be appropriate for the Federal Reserve to Increase income tax rates Sell government bonds Reduce reserve requirements Print...
1. Assuming that banks lend all of their access reserves and people deposit all of their...
1. Assuming that banks lend all of their access reserves and people deposit all of their money, what will the Fed have to do in order to increase the supply of money by $120 billion if the Required Reserves Ratio is .20? a. It needs to buy $20 billion dollar worth of bonds from banks b. It needs to buy $24 billion dollar worth of bonds from banks c. It needs to sell $20 billion dollar worth of bonds from...
Which of the following policies by the Federal Reserve is likely to decrease the money supply?...
Which of the following policies by the Federal Reserve is likely to decrease the money supply? A. None of these B. Reducing reserve requirements C. Selling government bonds D. Decreasing the discount rate
1. When the Fed purchases government bonds, that tends to ___ the federal funds rate and...
1. When the Fed purchases government bonds, that tends to ___ the federal funds rate and ___ the prime rate. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease e. None of the above 2. How does the Federal Reserve affect the supply of money using open market operations? a. The Fed increases the reserve requirements of bank and thus banks must obtain additional funds from the Fed. b. The Fed buys government bonds from banks, which...
12 .Which one of these assets is the MOST liquid one? Select one: a. Land b....
12 .Which one of these assets is the MOST liquid one? Select one: a. Land b. A corporate bond 13. Justin pays for his groceries using a debit card. Justin is using money as: Select one: a. A medium of arbitration b. A medium of exchange c. A unit of account d. A store of value e. A unit of transaction c. A stock in a small, risky company d. A vehicle 14. Emma, a high school student, lives with...
1. The Federal Reserve Act says that the Fed must try to achieve​ ______. A. a...
1. The Federal Reserve Act says that the Fed must try to achieve​ ______. A. a balanced budget B. maximum​ employment, stable​ prices, and moderate​ long-term interest rates C. a stable U.S. dollar on foreign exchange markets and moderate​ long-term and​ short-term interest rates D. an economic environment in which investment in U.S. stock and money markets is encouraged The Federal Reserve Act says that the Fed must use​ ______ to achieve its objectives. A. bank reserves B. commercial banks...
Which of the following may cause the money multiplier to increase? Select one: a. The Fed...
Which of the following may cause the money multiplier to increase? Select one: a. The Fed sells government bonds b. The Fed increases the reserve requirement c. The Fed decreases the interest rate on bank deposits held at the Fed d. The Fed buys government bonds e. The Fed increases the interest rate on bank deposits held at the Fed
In pursuing its monetary policy goals, the Fed Select one: A. can easily address inflation and...
In pursuing its monetary policy goals, the Fed Select one: A. can easily address inflation and unemployment at the same time. B. only ever needs to use an expansionary (stimulative) policy. C. must choose between addressing inflation or unemployment, since these goals conflict. D. has to follow the wishes of Congress. When the Fed wants to increase the level of reserves in banks, it can Select one: A. increase the discount rate. B. sell government bonds to banks. C. buy...
4- What is it called when the Fed takes actions that result in an increase in...
4- What is it called when the Fed takes actions that result in an increase in the money supply? A. Contractionary fiscal policy B. Expansionary fiscal policy C. Contractionary monetary policy D. Expansionary monetary policy 5. If the federal government finances a deficit by borrowing, we can expect A. National debt will decrease B. More income taxes will be collected C. Higher interest rates due to the higher demand for loanable funds D. Higher Inflation in the economy E. All...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT