Page Ref 906524 Learning Outcome Macro 12 Explain how monetary policy

Page ref 906524 learning outcome macro 12 explain how

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Page Ref: 906/524Learning Outcome: Macro-12: Explain how monetary policy influences interest rates, aggregatedemand, real GDP and inflation.41
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146) If the Fed orders an expansionary monetary policy, describe what will happen to thefollowing variables relative to what would have happened without the policy:a.The money supplyb.Interest ratesc.Investmentd.Consumptione.Net Exportsf.The aggregate demand curveg.Real GDPh.The price levelAnswer: a.The money supply increasesb.Interest rates fallc.Investment increasesd.Consumption increasese.Net exports increasef.The aggregate demand curve shifts to the rightg.Real GDP risesh.The price level rises146)Page Ref: 906/524Learning Outcome: Macro-12: Explain how monetary policy influences interest rates, aggregatedemand, real GDP and inflation.147) If the Fed orders a contractionary monetary policy, describe what will happen to thefollowing variables relative to what would have happened without the policy:147)Page Ref: 906/524Learning Outcome: Macro-12: Explain how monetary policy influences interest rates, aggregatedemand, real GDP and inflation.42
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148) Use a graph to show the effects of an expansionary monetary policy moving an economyout of recession and to potential real GDP. Explain what happens to aggregate demand,real GDP, and the price level.148)Answer: If the economy is in recession, it is currently at pointA, below potential real GDP.An expansionary monetary policy will shift the aggregate demand curve to theright fromAD1toAD2, increasing real GDP and the price level until it reachespotential real GDP at pointB.Page Ref: 905-906/523-524Learning Outcome: Macro-12: Explain how monetary policy influences interest rates, aggregatedemand, real GDP and inflation.43
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