4.0, 28. Which of the following does not represent one of the goals of the Feder
ID: 1122431 • Letter: 4
Question
4.0, 28. Which of the following does not represent one of the goals of the Federal Reserve a. Balanced budget b. low inflation C. high employment d. economic growth A tighter monetary policy is intended to a. Slow the economy down in order to keep inflation in check b. Speed th c. Slo d. Speed the economy up in order to keep inflation in check e economy up in order to have an expansionary effect on the economy w the economy down in order to have an expansionary effect on the economy 2130. If the government increased spending and borrowed the money to do i, some economists argue that aggregate demand will not increase because of the a. Crowding-out effect b. Interest rate effect Wealth effect c. d. Income effect 4131. which of the following monetary measures would best complement fiscal measures de signed to stimulate aggregate demand during a period of high unemployment? a. An increase in reserve requirements b. The purchase of bonds by the Federal Reserve c. An increase in the Fed's discount rate d. An increase in margin requirements necessary to buy stock 32. A balanced budget is present when The economy is at full employment b. a. The actual level of aggregate spending equals the planned level of spending Public sector spending equals private sector spending c. d. Government revenues equal expenditures nu33. The multiplier principle is important because it Was central to economic theory before the Great Depression a. b. c. Implies that investment will help stabilize the economy Shows why small shifts in investment and other components of aggregate spending have a powerful influence on GDP and national income d. illustrates why a small change in income causes a large change in saving 4. The legal requirement that commercial banks hold reserves equal to some fraction of their deposits a. Limits the ability of banks to expand the money supply by extending additional loans b. Prevents the Fed from controlling the money supply since commercial banks can always offset the actions of the Fed Prevents runs on banks by depositors who fear that banks have insufficient assets to meet the claims of their depositors Limits the ability of the Treasury to expand the national debt c. d. /35. Excess reserves of banks equal a. b. c. d. Actual reserves minus required reserves Actual reserves minus demand deposits Assets minus liabilities of the banks Required reserves minus demand depositsExplanation / Answer
Answer 28. a) Balanced budget
The goals of the fed include maximum sustainable employement, stable inflation and moderate long term interst rates. Maintaining a balanced budget is not its goal although it is desirable state in an economy. But all these goals are helpful in maintaining a balanced budget.
Answer 29 a) slow down the economy in order to check inflation.
Tighter monetary policy or contractionery policy is adopted when inflation is too high. It slows down the economy be reducing the money supply. Interest rate become higher and spending is reduced.
Answer 30 a) crowding out effect
If the govt borrowed money to increase spending then it will lead to rise of real interst rates for the business which may reduce the demand for money and finally reduce the investment in an economy. This is called the crowding out effect.
Answer 31 b) Purchase of bonds by fed.
By purchasing bonds fed will increase the money supply in the economy which will increase the demand and will be effective in reducing the unemployment rate.
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