the right) when which of the following occurs? a. an increase in taxes. b. an increase in output. c. an open market sale of bonds by the central bank. d. an increase in consumer confidence. e. none of the above. 4. Suppose policy makers decide to reduce taxes. This fiscal policy action will cause which of the following to occur? a. the LM curve shifts and the economy moves along the IS curve. b. the IS curve shifts and the economy moves along the LM curve. c. both the IS and LM curves shift. d. neither
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Department of Economics University of California‚ Berkeley Fall 2012 Econ 182 Solutions Problem Set 8 Problem 1. Exchange Rates and International Transmission a. Suppose that the US engages in a monetary expansion. Since exchange rate is pegged to the US dollar‚ country X’s monetary authorities are forced to expand their money supply as well (recall that i = i* under FixER). Interest rates fall in country X‚ output expands‚ and of course the exchange rate remains unchanged. On the AA-DD diagram
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experienced its worst financial crisis since the Great Depression from December 2007 to June 2009. • The U.S. gross domestic product (GDP) contracted by over 3% in 2009 and the unemployment rate hit double digits. While strong policy action has been taken‚ both monetary and fiscal‚ the recovery has been fragile and modest with growth rates between 1% and 2%. Very High Economic Risk Moderate Low High Very Low Political Risk Moderate Low High • Economic performance in the region
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holdings causes the currency ratio to rise and the money multiplier to fall. As a result‚ there will be a decrease in the money supply. To maintain the money supply‚ the Fed must make a defensive purchase of bonds on the open market‚ raising the monetary base to counter the decline in the multiplier. 6. “The only way the Fed can affect the level of borrowed reserves is by adjusting the discount rate.” Is this statement true‚ false‚ or uncertain? Explain your answer. This statement is false
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issues to be addressed in Macro Economics: o Rising Prices o Rising Unemployment o Falling GDP o Balance of Payments Crisis. • Tools of Macro Economic Policy and Management: o Fiscal Policy o Monetary Policy o Other Policies: Trade‚ Price and Labour Policies. 2. The Key Macro Economic Concepts: • Aggregate Supply (AS) Curve: o Describes‚ for each given price level‚ the quantity of output firms are willing to supply.
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make payments in the behalf of government and carry out other banking operations. • It provides loans to both union and state government and also helps them to clear the public debt. • It gives advice to the government on all matters relating to monetary and banking. Bankers Bank and Lender of Last Resort: • According to banking companies’ act of 1949‚ every schedule bank has to maintain the cash balance of 5% demand liabilities‚ and 2% time liabilities. • In 1962 the system was abolished and
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can have control over in such as the vision. The external factors are those that the company has no control over such as government policies‚ cultural factors and others. Value system The value system of the founders and those at the helm of affairs has important bearing on the choice of business‚ the mission and the objectives of the organization‚ business policies and practices. Mission and vision and objectives Vision means the ability to think about the future with imagination and wisdom. Vision
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(31 Mar. 2012). Colander‚ D.C. (2004) Monetary policy and the debate about macro policy. In M.G. Hill (5th Ed.)‚ Macroeconomics. New York: The McGraw-Hill Companies. Colander‚ D.C.‚ & Gamber‚ E.N. (2002) The nuts and bolts of macroecomomic policy. In P. Hall (Ed.)‚ Macroeconomics. New Jersey: Pearson Education. Fox‚ J. (2012) The economics of well-being. Harvard Business Review‚ 90‚ 78 – 83. Jackson‚ J.‚ Mclver‚ R.‚ & Wilson‚ E. (2011) Fiscal policy and the public debt. In M.G. Hill (9th
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use the fiscal policy and monetary policy to stabilize the economy? ◆ According to the basic Keynesian model inadequate spending is an important cause of recessions. To fight recessions- at least‚ those caused by insufficient demand rather than slow growth of potential output- policymakers must find ways to stimulate planned spending. Policies that are used to affect planned aggregate expenditure‚ with the objective of eliminating output gaps‚ are called stabilization policies. Policy actions intended
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Monetary policy is the use by the Government or central bank ( In Indian Context RBI) of interest rates or controls on the money supply to influence the Economy. The reserve bank of India is the agency which formulates and Implements monetary policy on behalf of the Indian government in an attempt to achieve a set of objectives that are expressed in terms of macroeconomic variables such as the achievement of a desired level or rate of growth in real activity‚ the exchange rate‚ the price level or
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