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economics 14th global
Questions and Answers of
Economics 14th Global
Name the comparative-advantage theory that matches each of the following explanations of comparative advantage.a. Differences in labor productivity among countries:b. The advantage that comes to a
Governments can generate revenues by restricting trade through ; this is a common tactic in (industrial, developing)countries.
The argument that new industries should receive temporary protection is known as the argument.
Trade restrictions usually(create more, redistribute) domestic jobs within the economy.
Tariffs are on imports or exports.In the United States, tariffs on(imports, exports) are illegal under the Constitution.
A country is said to its currency when the value of its currency is tied to another country’s currency.
What type of exchange rate system does the United States use?
Saving Jobs by Restricting Imports: Is It Worth the Cost? One area of the U.S. economy that has been protected from international competition is the food and beverage industry. According to a study
Tax Effects of Import Restrictions According to Newsweek:Lower-income families are hit hardest by trade restrictions, because they spend a far greater share of their earnings at the store. In a
1. What does the Federal Reserve do?
3. What are the tools of monetary policy?
4. What role do central banks play in the foreign exchange market?
5. What are the determinants of the demand for money?
6. How does monetary policy affect the equilibrium level of real GDP?
7. What does the ECB do?
1. Is there a tradeoff between inflation and the unemployment rate?
2. How does the tradeoff between inflation and the unemployment rate vary from the short to the long run?
3. What is the relationship between unexpected inflation and the unemployment rate?
4. How are macroeconomic expectations formed?
6. How do real shocks to the economy affect business cycles?
7. How is inflationary monetary policy related to government fiscal policy?
9. What is productivity?
1. What determines the goods a nation will export?
2. What are the sources of comparative advantage?
3. Why do countries restrict international trade?
4. How do countries restrict the entry of foreign goods and promote the export of domestic goods?
5. What kinds of exchange rate arrangements exist today?
1. What is globalization?
2. What are the arguments against globalization?
3. What are the arguments in support of globalization?
4. How has globalization affected economic growth and poverty?
5. Can recent financial crises be linked to globalization?
1. The Federal Reserve System divides the nation into 12 districts.a. List the 12 cities where the district banks are located.b. Which Federal Reserve district do you live in?
2. Briefly describe the functions the Fed performs for the banking community. In what sense is the Fed the bankers’ bank?
3. Draw a graph showing equilibrium in the money market.Carefully label all curves and axes and explain why the curves have the slopes they do.
4. Using the graph you prepared for exercise 3, illustrate and explain what happens when the Fed decreases the money supply.
There are several tools the Fed uses to implement monetary policy.a. Briefly describe these tools.b. Explain how the Fed would use each tool in order to increase the money supply.
Suppose you are a member of the FOMC, and the U.S. economy is entering a recession. Write a directive to the New York Fed about the conduct of monetary policy over the next two months. Your directive
11. Why do you demand money? What determines how much money you keep in your pocket, purse, or bank accounts?
12. What is the current yield on a bond? Why do interest rates change when bond prices change?
14. Suppose the banking system has vault cash of $1,000, deposits at the Fed of $2,000, and demand deposits of$10,000.a. If the reserve requirement is 20 percent, what is the maximum potential
Which countries have their monetary policy made by the ECB?
16. How is the ECB different from the Federal Reserve?
1 The Fed’s most important function is to■a. provide services to the banking community.■b. control the money supply.■c. supervise the banking community.■d. clear checks.■e. hold bank
2 According to the equation of exchange,■a. if the money supply increases, and velocity is constant, real GDP must rise.■b. if the money supply increases, and velocity is constant, nominal GDP
3 To increase the money supply, the Fed would■a. increase the reserve requirement, increase the discount rate, and sell bonds.■b. increase the reserve requirement, increase the discount rate, and
4 If the Fed intervened in the foreign currency market to buy another currency, the domestic money supply would , and the Fed might bonds to offset its foreign currency operations. This process is
5 In recent years, the Fed’s short-run operating target has been■a. M1.■b. M2.■c. GDP.■d. the federal funds rate.■e. the level of reserves held by commercial banks.
6 If the money supply is $500, the price level is 3.30, and the velocity of money is equal to 6, Q will be, and nominal GDP will be___________.■a. 250; $1,500■b. 3,000; $9,000■c. 18; $54■d.
7 An increase in the interest rate will cause a(n)■a. increase in the demand for money.■b. increase in the quantity demanded of money.■c. decrease in the demand for money.■d. decrease in the
8 The supply of money is■a. a positive function of interest rates.■b. a negative function of interest rates.■c. a positive function of income.■d. a negative function of income.■e.
9 If the interest rate is above the equilibrium rate, there is an excess of money. People will bonds, and the interest rate will .■a. demand; sell; rise■b. demand; sell; drop■c. demand; buy;
10 If the Fed wants to increase equilibrium income, it should the supply of money, which will interest rates. The change in interest rates will consumption and investment, causing aggregate demand to
The Federal Reserve System was intended to be a(centralized, decentralized)system.
2 Monetary policy is largely set by the __________________.
3 The chairperson of the Federal Reserve Board of Governors is appointed by the and serves a -year term.Governors serve -year terms.
4 The most important function of the Fed is _____________-.
5 The has been called the second most powerful person in the United States.
6 Write the formula for the equation of exchange.
7 The of money is the average number of times each dollar is spent on final goods and services in a year.
8 The states that if the money supply increases, and the velocity of money is constant, nominal GDP must rise.
9 List the three tools the Fed uses to change reserves.
10 The Fed can reduce the money-creating potential of the banking system by (raising, lowering) the reserve requirement.
The rate is the rate of interest the Fed charges banks. In other countries, this rate is often called the rate.
If the Fed wants to increase the money supply, it(raises, lowers) the discount rate.
To increase the money supply, the Fed(buys, sells) bonds.14 If the Fed wants the dollar to appreciate against the yen, it will buy (dollars, yen).
If the Fed wishes to support a foreign currency, it(increases, decreases) the domestic money supply unless offsetting operations are undertaken.
The demand for money depends on and .
There is a(n) relationship between the interest rate and the quantity of money demanded.
The greater the nominal income, the(greater, smaller) the demand for money.
The supply of money(does, does not) depend on interest rates and nominal income.
Norm and Debbie keep 1.5 months’ income in a NOW account for emergencies. This is an example of the demand for money.
A young couple cashes in a bond to buy a crib and changing table to prepare for the birth of their first child.This is an example of the demand for money.
If nominal income increases, the demand for money(shifts to the left, does not change, shifts to the right).
You read in the Wall Street Journal that the bond markets rallied yesterday (bond prices increased). Interest rates must have (increased, decreased).
A decrease in the money supply causes interest rates to (rise, fall),which causes consumption and investment to(rise, fall). The changes in consumption and investment cause aggregate demand
More on Foreign Exchange Market Intervention If the Fed feels that the price of the dollar in terms of U.K. pounds is unacceptably high, it may choose to intervene directly in the foreign exchange
Bond Prices and Interest Rates Fill in the gaps in these typical quotations from articles from the Wall Street Journal.a. “The benchmark 10-year Treasury bond rose more than 1/4 point to 106, a
the buying and selling of government bonds by the Fed to control bank reserves, the federal funds rate, and the money supply Match each term with its correct definition by placing the appropriate
the demand to hold money to buy goods and services Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. Federal Open Market K. foreign
the official policymaking body of the Federal Reserve System Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. Federal Open Market K.
the interest rate a bank charges when it lends excess reserves to another bank Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A.
the buying and selling of foreign exchange by a central bank to move exchange rates up or down to a targeted level Match each term with its correct definition by placing the appropriate letter next
an objective used to achieve some ultimate policy goal Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. Federal Open Market K. foreign
the cash a bank holds in its vault plus its deposit in the Fed Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. Federal Open Market K.
an equation that relates the quantity of money to nominal GDP Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. Federal Open Market K.
the interest rate the Fed charges commercial banks when they borrow from it Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. Federal
instructions issued by the FOMC to the Federal Reserve Bank of New York to implement monetary policy Match each term with its correct definition by placing the appropriate letter next to the
the use of domestic open market operations to offset the effects of a foreign exchange market intervention on the domestic money supply Match each term with its correct definition by placing the
the demand for money to cover unplanned transactions or emergencies Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. Federal Open
the demand for money created by uncertainty about the value of other assets Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. Federal
the average number of times each dollar is spent on final goods and services in a year Match each term with its correct definition by placing the appropriate letter next to the corresponding
with constant velocity, changes in the quantity of money change nominal GDP
available savings that are lent to borrowers to spend Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. money K. Eurocurrency market B.
an asset used to settle debts between governments Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. money K. Eurocurrency market B.
financial assets that are the most liquid Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. money K. Eurocurrency market B. liquid
the cash reserves beyond those required, which can be loaned Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. money K. Eurocurrency
a network for transferring money, popular in Muslim countries Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. money K. Eurocurrency
the use of foreign money as a substitute for domestic money when the domestic economy has a high rate of inflation Match each term with its correct definition by placing the appropriate letter next
the reciprocal of the reserve requirement Match each term with its correct definition by placing the appropriate letter next to the corresponding number.A. money K. Eurocurrency market B. liquid
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