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Side Effects of Supporting a Currency. Suppose a country s currency came under attack by speculators. What would be the side effect of such a policy?
Where Is Monetary Policy Stronger? In an open economy, changes in monetary policy affect both interest rates and exchange rates.
Explain why the decision to purchase a refrigerator is likely to be more sensitive to interest rates than the decision to buy clothing.
The economy starts to head into a recession. Using a graph of the money market, show what happens to interest rates. What happens to bond prices?
What will the price of the bond be? What will the new price of the bond be if the interest rate falls to 3 percent?
Given what you know about opportunity costs, how would interest paid on checking affect the demand for money?
What happens to interest rates when the economy recovers from a recession? Rising Interest Rates during an Economic Recovery.
What is the income elasticity of demand? Test whether both elasticities are significantly different from zero at the 5 percent level.
Where Should Regional Banks Be Located Today? Given the changes in the location of economic activity that have occurred since the founding of Federal Reserve.
If there were no reserve requirements for banks, how do you think their reserve holdings would compare to money market mutual funds?
Only large banks and credit unions accepted the warrants. Why should IOUs warrants be viewed as money?
Why should these gift cards be considered part of the money supply? How do they differ from travelers checks?
How do you think the introduction of debit cards affected the amount of currency in the economy? How about the amount of checking account deposits?
What percentage of women have electricity in the home? From part (iii), can you infer that having electricity "causes" women to have fewer children? Explain.
What assumptions about the economy must be true for the invisible hand to work? To what extent are those assumptions valid in the real world?
Explain how the law of demand affected your purchase. Give specific examples of how the determinants of demand and supply affect this product.
Think about a product that you have purchased recently. Discuss the new equilibrium price and quantity that result from these changes.
Crisis in the Short-Term Credit Market. In 1973, several major companies went bankrupt. How do you think the Fed should have handled that situation?
After the financial crisis in 2008, Congress wanted to have more oversight of the Fed and some suggested. What are the risks of this increased oversight?
What is the multiplier for investment spending for this economy? What is the level of saving at the level of equilibrium income? Show it is equal to investment.
Explain how this difference might lead to a larger wealth effect for increases in housing prices than decreases in prices.
What would be their logical response in this situation? Is this consistent with the wealth effect?
Why some economists believed the increase in housing prices after 2002 was related to the fall in household savings that was also observed during that period.
If output equals y1 , what is the level of expenditures? At output equal to y1 , does the level of expenditures fall above, below, or on the 45° line?
What are the equilibrium values of the real wage, employment, and output? In terms of lost output, what is the distortion cost of this tax?