2. If crowding out happens then Question options: increased saving by households

Question

2. If crowding out happens then Question options:

increased saving by households reduced interest rates and caused investment to fall.

as the value of the dollar increases, imports increase and crowd out purchases of domestically produced goods.

deficit spending by government increased interest rates and led to less private investment.

4. If The Fed decides to buy bonds & securities in the open market, it will likely

Question options:

increase the money supply and decrease aggregate demand.

decrease the money supply and decrease aggregate demand.

decrease the money supply and increase aggregate demand.

increase the money supply and increase aggregate demand.

5.

The equation of exchange states that

Question options:

money in circulation ´ prices = velocity ´ income

real GDP = money in circulation ´ velocity

nominal GDP = money in circulation ´ velocity

money in circulation ´ income = velocity ´ prices

7.

“Crowding out”, if it happens, refers to the situation in which investment __________ when increased government spending __________.

Question options:

rises; raises the demand for money

rises; raises the supply of money

falls; raises the demand for money

falls; lowers the supply of money

increase the money supply and decrease aggregate demand.

decrease the money supply and decrease aggregate demand.

decrease the money supply and increase aggregate demand.

increase the money supply and increase aggregate demand.

5.

The equation of exchange states that

Question options:

money in circulation ´ prices = velocity ´ income

real GDP = money in circulation ´ velocity

nominal GDP = money in circulation ´ velocity

money in circulation ´ income = velocity ´ prices

7.

“Crowding out”, if it happens, refers to the situation in which investment __________ when increased government spending __________.

Question options:

rises; raises the demand for money

rises; raises the supply of money

falls; raises the demand for money

falls; lowers the supply of money

Explanation / Answer

2.Answer is 1st . this is often as a result of because it could be a state of affairs once enlarged interest rates cause a discount privately investment payment specified it dampens the initial increase of total investment payment is named state of affairs out impact. state of affairs out could be a reduction privately investment that happens thanks to a rise in government borrowing. If a rise in government payment and/or a decrease in tax revenues ends up in a deficit that's supported by enlarged borrowing, then the borrowing will increase interest rates, resulting in a discount privately investment.

4. Answer is 4th. As within the montary policy the FOMC buys and sells government securities to line the money provide. The is method is named open market operations. the govt. securities that are utilized or used in open market operations such as Treasury bills, bonds and notes. If the fed desires to extend the money provide within the economy it'll obtain securities.To increase the money provide within the market, the Fed can purchase securities from banks. The banks acquire the funds from the sale may be used as loans to people and businesses. The more cash that's out there within the marketplace for disposition, the lower the rates on these loans become, that causes additional borrowers to access cheaper capital. This access to cheap capital ends up in larger investment and can typically stimulate the general economy. this can cause increase the mixture demand of the economy.

5. Answer is that the 3rd. this could be explained with given rationalization.
the equation of exchange is that the relation:
M/ V = P/Q
where, for a given amount,
M, is that the total nominal quantity of cash provide in circulation on the average in associate economy
V, is that the speed of cash, that's the typical frequency with that a unit of cash is spent.
P, is that the index.
Q, is associate index of real expenditures (on fresh made product and services).
Thus PQ is that the level of nominal financial gain. thus it becomes
nominal financial gain = cash in circulation * speed

7. Answer is 3rd. this is often as a result of state of affairs out could be a reduction privately investment that happens thanks to a rise in government borrowing. If a rise in government payment and/or a decrease in tax revenues ends up in a deficit that's supported by enlarged borrowing, then the borrowing will increase interest rates, resulting in a discount privately investment. thence investment falls this can cause increase in government payment which is able to cause raises the demand of cash.

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