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Macroeconomics help please
If anyone could help with the following, it would be greatly appreciated! I did the first three, but 4-6 were confusing me.Suppose that the following holds true for an economy:
Ye = GDP at equilbrium = $2800
Y = Potential GDP = $3000
Total demand deposits = $1000
Total reserves = $200
MPC = .75
Total investment = $250
Excess reserves = $0
taxes = t = 0
r = interest rate = 6.5%
1) The economy is going through a/an :
a) recession
b) inflation
2) To deal with the situation specified in #2, the Fed should do what to aggregate demand?
a) increase
b) decrease
3) To increase aggregate demand, total investment should change to a level of (fill in the blank) _____?
I put $350.
4) If each change in r of 1 percentage point results in I changing by $25, what would the Federal Reserve's new target interest rate be?
5) If each $50 change in total deposits causes r to change by 1 percentage point, would the Federal Reserve have to make deposits increase or decrease? By how much?
6) To reach its new target level of deposits, the Federal Reserve should (buy, sell <- pick one) bonds that are worth ________ (fill in the blank with a dollar amount).
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- By jaygat455 |
- Category: economics |
- Grade level: college and above
- Nov/10/2008 |
- Answers to this question: 0
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