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7. Suppose the economy is initially in long run equilibrium. The Fed
enacts a policy to decrease the discount rate. In the short run, this
expansionary monetary policy will cause;
a. A shift from SRAS to SRAS2 and a movement to point B, with a
lower price level and higher output.
b. A shift from AD1 to AD2 and a movement to point B, with a
higher price level and a higher output.
c. A shift from SRAS2 to SRAS1 and a movement to point D, with a
higher price level and a lower output.
d. Shift from AD2 to AD1 and a movement to point C with a lower
price level and the same output.
8. Excess Reserves
a.
b.
c.
d.
Are the deposits that banks do not use to make loans
Are loans made at above market interest rates
Are reserves banks keep to meet the reserves requirement
Are reserves banks keep above the legal requirement
9. A simple economy produces two goods, Apple pies and software.
Price and Quantity data are as follows;
10.
Consider the following table;
11.
What can we expect from the Federal Reserve Bank if it
seeks to move the economy in the direction of a long run
macroeconomics equilibrium?