Show the effects of the Federal Reserve System implementing expansionary monetary policy to boost real GDP growth. Use a money demand and supply analysis to show how interest rates affect aggregate demand in an aggregate demand and supply model. Assume the economy is initially in a recession.

Question

anonymous · Answer

as interest rate in decrease , more people can afford to buy more things as a result the demand will go up

anonymous · Answer

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anonymous · Answer

So graphically it would look something like this?

anonymous · Answer

I am not good with graphs

anonymous · Answer

and if the Fed implemented contractionary monetary policies to alleviate inflationary pressures, the opposite of what you said would occur, right?

anonymous · Answer

yes

anonymous · Answer

why would the federal reserve want to increase the target federal funds rate if real gdp is above potential real gdp and or if current inflation is above target inflation?

anonymous · Answer

That is same question again, to reduce demand and bring gdp growth/inflation back to desired levels

anonymous · Answer

can you graph the answer to that?

anonymous · Answer

noooo come back!

anonymous · Answer

how would i calculate inflation rate?

anonymous · Answer

Economics is not really my thing....sorry:-)

anonymous · Answer

o ok. i just assumed you were since you helped me with accounting yesterday. thanks for trying though.

anonymous · Answer

I studied accounting and economics but a long time ago.