The Influence of Monetary and Fiscal Policy on Aggregate Demand 9

The Influence of Monetary and Fiscal Policy on Aggregate Demand 9

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Unformatted text preview: 9 . Problems and Applications Q1 Use the graph to help you oomolete the task that follows. You will not be gradei:f on your final placement of the curves oh the graph. Mo ney§up p Iv _o_ I‘vlonei.r Demand ® . —El— m Mo ne‘,r Su p p Iv E n: a - - - - - - - - -+ fill a E Qua nljty of Mo nev Development Supply of Money Demand for Mlle? Interest Rate The Feds bond traders buv bonds in open—market operations. Shifls lap the right «I No change «I Decreases «I An increase in creditcard availability reduces the cash people hold. No change «I Shifls In the left «I Decreases «I The Federal Reserve reduces banks’ reserve requirements. Shifls lap the right «I No change «I Decreases «I Households decide to hold more money to use for holiday- shopping. No change «I Shifls to the right «I Increa «I A wave of optimism boosts business investment and expands aggregate No change «I Shifls lap the right «I Increases «I demand. “Points:—1f1 ...
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