higher interest rate _____ consumption, investment, and _____, which _____ aggre

Question

higher interest rate _____ consumption, investment, and _____, which _____ aggregate demand.

Question 6 (1 point)

Question 6 options:

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b)

c)

d)

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Question 7 (1 point)

Question 7 options:

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d)

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Question 8 (1 point)

If the Federal Reserve wishes to raise the interest rate, what does it need to do?

Question 8 options:

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d)

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Question 9 (1 point)

The twin goals of monetary policy are:

Question 9 options:

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b)

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d)

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Question 10 (1 point)

If monetary policy is tight:

Question 10 options:

a)

b)

c)

d)

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Question 11 (1 point)

A _____ is the most difficult for the Federal Reserve to address because it causes both inflation and unemployment to rise.

Question 11 options:

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b)

c)

d)

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Question 12 (1 point)

If the economy is currently operating below long-run output, what should the Federal Reserve do?

Question 12 options:

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d)

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Question 13 (1 point)

Loosening monetary policy causes interest rates to ____, and consumption and investment to ____.

Question 13 options:

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d)

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Question 14 (1 point)

A lower interest rate increases consumption, investment, and _____, which _____ aggregate demand.

Question 14 options:

a)

b)

c)

d)

Question 6 (1 point)

Explanation / Answer

(First question)

Higher interest rate decreases consumption, investment and foreign currency** Demand, which decreases aggregate demand.

**Provide exact drop down options in Comment section.

(Question 6) Option (c)

Initial long run equilibrium is at point d where LRAS intersects AD0 and SRAS0. A restrictive monetary policy will lower money supply and aggregate demand, shifting AD0 leftward to AD2, intersecting SRAS1 at point a where price level is back to original level but real GDP is further lower.

(Question 7) Option (b)

Initial long run equilibrium is at point d where LRAS intersects AD0 and SRAS0. Higher cost of inputs will lower aggregate supply, shifting SRAS0 leftward to SRAS1, intersecting AD0 at point b where price level is higher but real GDP is lower.

(Question 8) Option (c)

When Fed sells bonds to banks, money supply falls, increasing interest rate.

(Question 9) Option (c)

(Question 10) Option (b)

Tight monetary policy decreases money supply & increases interest rate. Higher interest rate attracts foreign investment which raises the demand for domestic currency (dollar).

NOTE: As per Chegg answering guidelines, first 6 questions are answered.

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