1) The fed\'s monetary policy options for ending severe demand pull inflation in
ID: 1124859 • Letter: 1
Question
1) The fed's monetary policy options for ending severe demand pull inflation include:
a) increasing interest rates decreasing the reserve Ratio or both
b) decrease in the reserve ratio decreasing interest rates or both
c) increasing the reserve ratio selling Bonds on the open market or both
d) decreasing the reserve ratio buying Bonds on the open market or both
e) decreasing the discount rate selling Bonds on the open market or both
2) To end a severe recession, what might be the appropriate fiscal and monetary policy actions?
Explanation / Answer
1)
The fed's monetary policy options for ending severe demand pull inflation include:
c) increasing the reserve ratio, selling bonds on the open market, or both
(Both these actions would shift the AD curve to the left)
2)
To end a severe recession, what might be the appropriate fiscal and monetary policy actions?
Fiscal policy actions: Decrease tax rate, increase government purchases and/or transfer payments. (These actions would shift the AD curve to the right by increasing expenditure)
Monetary policy actions: Decrease reserve ratio, decrease discount rate or buy bonds/securities from the public (These actions would shift the AD curve to the right by increasing the money supply)
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