Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 31, Problem 40APA
(a)
To determine
Identify the state of Country U in the summer of 2017 if the federal funds rate is steady.
(b)
To determine
Identify the Federal Open Market Committee (FOMC) expectation about future employment, real
(c)
To determine
Determine the faster growth of interest rates’ influence on the aggregate demand (AD), the output gap, and the inflation rate.
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Economics
If there is an inflationary gap, what should the Fed do? Explain, provide name, and show in i-M space.
Consider the following macroeconomy, with fixed prices (all amounts are in millions of $):
YFE = 7000
C = 40 + 0.9 YD
I = 500
G = 250
T = 40
a. Calculate eqm Y in this model and then graph it in the Keynesian-cross diagram. Indicate and provide the name and size of the gap, if any.
b. Prove that the appropriate relationship between I and various types of Savings holds at eqm.
c. What two different policies could Congress enact? You must calculate the exact changes in the appropriate variables and provide the appropriate name(s) for the(se) policies. Graph each of these policies in the Keynesian-cross diagram. Show what your policies would do, if anything, in the money-market diagram, (in i- M space) cet. par. Indicate the initial disequilibrium and explain what will happen and why.
d. Go back to the original eqm in part a. Now…
Which of the following describes the chain of events the Central bank uses to fight recession?
A. Raise the monetary policy rate target, sell government securities, decrease reserves and loans, increase aggregate demand.B. Raise the monetary policy rate target, buy government securities, increase reserves and loans, decrease aggregate demand.C. Lower the monetary policy rate target, buy government securities, decrease reserves and loans, decrease aggregate demand.D. Lower the monetary policy rate target, buy government securities, increase reserves and loans, increase aggregate demand.
Suppose the economy is in long-run equilibrium, but the central bank decides to increase bank rate (the rate at which the central bank lends to banks). How does this affect the economy in the short run if the monetary policy is not fully anticipated? What are the effects in the short run if the policy is anticipated? Enter your results in the following table.
Short-Run Effects If Unanticipated
Short-Run Effects If Anticipated
Aggregate Demand
increase/no change/decrease
increase/no change/decrease
Short-Run Aggregate Supply
increase/no change/decrease
increase/no change/decrease
Price Level
increase/no change/decrease
increase/no change/decrease
Output Level
increase/no change/decrease
increase/no change/decrease
Real Interest Rate
increase/no change/decrease
increase/no change/decrease
Chapter 31 Solutions
Macroeconomics
Ch. 31.1 - Prob. 1RQCh. 31.1 - Prob. 2RQCh. 31.1 - Prob. 3RQCh. 31.1 - Prob. 4RQCh. 31.2 - Prob. 1RQCh. 31.2 - Prob. 2RQCh. 31.2 - Prob. 3RQCh. 31.3 - Prob. 1RQCh. 31.3 - Prob. 2RQCh. 31.3 - Prob. 3RQ
Ch. 31.3 - Prob. 4RQCh. 31.4 - Prob. 1RQCh. 31.4 - Prob. 2RQCh. 31.4 - Prob. 3RQCh. 31.4 - Prob. 4RQCh. 31.4 - Prob. 5RQCh. 31 - Prob. 1SPACh. 31 - Prob. 2SPACh. 31 - Prob. 3SPACh. 31 - Prob. 4SPACh. 31 - Prob. 5SPACh. 31 - Prob. 6SPACh. 31 - Prob. 7SPACh. 31 - Prob. 8SPACh. 31 - Prob. 9SPACh. 31 - Prob. 10SPACh. 31 - Prob. 11SPACh. 31 - Prob. 12SPACh. 31 - Prob. 13SPACh. 31 - Prob. 14SPACh. 31 - Prob. 15SPACh. 31 - Prob. 16APACh. 31 - Prob. 17APACh. 31 - Prob. 18APACh. 31 - Prob. 19APACh. 31 - Prob. 20APACh. 31 - Prob. 21APACh. 31 - Prob. 22APACh. 31 - Prob. 23APACh. 31 - Prob. 24APACh. 31 - Prob. 25APACh. 31 - Prob. 26APACh. 31 - Prob. 27APACh. 31 - Prob. 28APACh. 31 - Prob. 29APACh. 31 - Prob. 30APACh. 31 - Prob. 31APACh. 31 - Prob. 32APACh. 31 - Prob. 33APACh. 31 - Prob. 34APACh. 31 - Prob. 35APACh. 31 - Prob. 36APACh. 31 - Prob. 37APACh. 31 - Prob. 38APACh. 31 - Prob. 39APACh. 31 - Prob. 40APACh. 31 - Prob. 41APA
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