F07Concept Rev. Midt3 review - Economics 304L Fall 2007 Concept Review Midterm 3 Please be sure that you understand the significance of and can work

Economics 304L Fall 2007 Concept Review: Midterm 3 Please be sure that you understand the significance of and can work with all of the following concepts. Everything on this Review is in the book. No answers will be posted. 1. How does the Fed increase and decrease the MS? (Ch. 10). 2. Why are bond prices and interest rates inversely related? (Ch. 11 and sheet on Blackboard) 3. Why does MD slope downward? (Ch. 11) 4. What will increase and decrease the MD? (Ch 11) 5. What is tight monetary policy and easy monetary policy? (Ch. 11) 6. What does the Planned Investment Schedule look like and why? (Ch. 12) 7. How will an increase in interest rates affect Y? (Ch 12) How will a decrease in interest rates affect Y? (Ch 12) 8. How will changes in the goods market affect the interest rate? (Ch 12) How will changes in the money market affect the interest rate? (Ch 12) 9. How will expansionary fiscal policy affect Y and the interest rate? (Ch 12) How will contractionary fiscal policy affect Y and the interest rate? (Ch 12) 10. How will expansionary monetary policy affect Y and the interest rate? (Ch. 12) How will contractionary monetary policy affect Y and the interest rate? (Ch 12) 11. What is the crowding-out effect? Explain. (Ch. 12) 12. How does the sensitivity or insensitivity of planned investment to changes in the interest rate affect the crowding-out effect? (Ch 12).