1. Only use 25 -50 words to answers the questions. 10 Points a. What is the purp

Question

1. Only use 25 -50 words to answers the questions. 10 Points

a. What is the purpose of the International Monetary Fund?

b. What is the role of the World Bank?

c. What is the effect of higher domestic prices?

d. Which direction would the aggregate demand or aggregate supply curve in the United States, if foreign countries were to fall into a deep recession?

e. Identify which direction and whether or not the aggregate demand or aggregate supply curve would shift if there was an increase in the money supply?

Explanation / Answer

a) IMF role is mainly to help countries recover from the crisis, IMF has a fund that helps countries to loan some money from the agency, IMF also has strict conditions to the lender. It is also a great institution which advises countries how to manage their economy

B) World bank is the developmental bank which mostly lends money to develop projects that serve the community. It is mostly a financing agency which lends to foreign governments and agencies. World bank has already lent billions of dollars to India and Africa

C) Higher domestic prices will result in decreased standard of living for the people, It also creates a very bad situation where members of middle class would fall back to poverty.

D) Aggregate demand would decrease as US is centre of global economics. Aggregate supply would actually increase as there are no takers for the goods. This is what happened after oil crash

E) Increase in money supply would ofcourse increase the aggregate demand and aggregate supply curve also would shift from equilibrium. The prices will rise and quantity supplied at higher prices will increase.

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