Monetart Policy in Theory and Practice

Question 1

When tax rates decrease, society’s disposal income increases.

What will happen when this disposal income is deposited in banks?

Answer 1

The equilibrium interest rate will decrease

Question 2

What will happen to the equilibrium interest rate if money stock increases due to an increase in capital inflows?

Answer 2

It will decrease

Question 3

If there is an output gap, which two actions will cause the AD curve to shift right?

Answer 3

1. The federal reserve buys bonds from the public

2. The feral reserve increases the money supply through FOMC

Question 4

There is an output gap, and the FederalReserve buys bonds from the public leading to the money supply increasing and the interest rate decreasing. What will take place next?

Answer 4

spending will increase, and the AD will shift right

Question 5

What is one of the challenges in implementing monetary policy according to the Keynesian school off thought?

Answer 5

Norris May not respond to lower interest rates

Question 6

Monetary policy can have lags like fiscal policy

Which type of lag is referred to as “outside lag” in monetary policy?

Answer 6

Impact