ECON 211 Exam 3 (UNL) Verified Answers
countercyclical policies attempt:
to reduce the intensity of economic fluctuations & smooth the GDP rate
Brainpower
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expansion policy aims:
to reduce the severity of an economic recession by shifting the labor demand curve to the right &
...
to reduce the intensity of economic fluctuations & smooth the GDP rate
Brainpower
Read More
expansion policy aims:
to reduce the severity of an economic recession by shifting the labor demand curve to the right &
"expand" the economic activity (GDP)
expansion policy means to:
heat up the economy
expansion policy: when does a recession occur?
when the labor demand curve shifts to the left
contractionary policy does what to the economy?
slows it down
-when it grows too fast
-"overheats"
contractionary policy shifts the labor demand curve to the.......?
left to reduce employment & growth rate of the economy
contractionary policy doesn't aim to....
reduce employment so much that the growth becomes negative
Why reduce employment & GDP growth?
-reduce inflation
-reduce risk of extreme contradiction by trying to "cool off" the economy before it "overheats"
Counter monetary policy
1. feds lower short-term interest rate & expand access to credit
2. long-term interest rates fall
3. consumption & investment rise; demand for goods & services rise
4. labor demand curve shifts to the right
The fed influences funds through.....
open market operations
The fed transacts with private banks to increase or decrease.......
,bank reserves
The fed can increase the supply of reserves through...
open market purchases
How much do the reserves fluctuate?
between $40 and $80 billion
what did the fed do during the 2007-2009 recession to decrease interest rates?
the fed drastically expanded reserves to $2.5 trillion
What tools does the Fed have to impact bank reserves?
1. Changing reserve equipment
2. Interest rate paid on reserves deposited @ the Fed
3. lending from discount window
4. quantitative easing
1. changing reserve equipment
the percentage of deposits that must be held as reserves @ the federal reserve
2. interest rate paid on reserves deposited @ the federal reserve
the feds started to pay interest on deposits in 2008, now its 0.25%
3. lending from discount window
private banks can borrow directly from the feds @ discount window
4. quantitative easing
the feds create a large quantity of bank reserves to buy long-term bonds, at the same time, increasing
the quantity bank reserves & pushing down the interest rate on long-term bonds
Expectations, inflation and monetary policy
The effectiveness of monetary policy depends on expectations about interest rates and inflation
contractionary monetary policy slows down the growth in:
bank reserves
contractionary monetary policy raises:
, interest rate
contractionary monetary policy reduces
borrowing
contractionary monetary policy slows growth in the:
money supply
contractionary monetary policy reduces the rate of
inflation
contractionary monetary policy flow chart
zero lower bound
-line that nominal interest rates can't cross
Which of the following best describes scarce resources?
resources for which the quantity that people want exceeds the quantity that is freely available
Economic reasoning implies that economic agents will make decisions:
by comparing the costs and benefits of various options
Which of following statements correctly highlights the difference between micro and macro
micro deals with small parts of the economy, whereas macro deals with aggregate economic
performance
Which of the following statements is true of optimization
economic agents who optimize attempt to choose the best feasible option, given the information that
they have
A student has two options: she can either surf the web, or work part-time. Working part-time pays her
$20 per hour. What is the student's opportunity cost of surfing the web for 5 hours?
$100
Suppose the market for cement is such that the govt. does not interfere in price determination but plays
an important role in the provision of property rights. While there are a large number of buyers and
sellers, everyone conducts transactions at a common market price. Which of the following statements is
true about the structure of the cement market?
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