A newspaper headline reads: "Fed Cuts Federal Funds Rate for Fifth Time This Year." This headline Indicates that the Federal Reserve is most likely trying to 6 Multiple Choice points eBook O reduce inflation in the economy. References O raise interest rates. O ease monetary policy. O tighten monetary policy.2 Smoothing the peaks and troughs of the business cycle with fiscal policy is Multiple Choice 6 points O relatively simple, because the government has access to the best information available. eBook References O relatively simple, because the political process usually works smoothly and without significant lags O difficult, because economists have not developed any theoretical models of the macroeconomy. O difficult, because the government lacks important information about the economy.3 Suppose the reserve requirement is Initially set at 12%. Instructions: In parts a and c, round your answers to two decimal places. In parts b and d, round your answers to one decimal place. a. At a reserve requirement of 12%, what Is the value of the money multiplier? 6 points b. If the reserve requirement is 12% and the Fed Increases reserves by $30 billion, what is the total Increase In the money supply? eBook billion References c. Suppose the Fed raises the reserve requirement to 16%. What is the value of the money multiplier now? d. Assume the reserve requirement Is 16%. If the Fed Increases reserves by $30 billion, what is the total Increase In the money supply? billion e. Raising the reserve requirement from 12% to 16% (Click to select) wo the money multiplier and [(Click to select) v the money supply.4 Use the following graph to answer the next question. 6 points Price Level Book References AD3 AD, AD2 Real GDP What combination would most likely cause a shift from AD, to AD2? Multiple Choice O An increase in taxes and an increase in government purchases O A decrease in taxes and an increase in government purchases O An increase in taxes and no change in government purchases O A decrease in taxes and a decrease in government purchases5 The purpose of expansionary monetary policy is to Increase Multiple Choice 6 points O the GDP gap. eBook References O the inflation rate. O real GDP. O interest rates.6 Use the following figure to answer the next question. AS points Price Level ADS eBook References AD, AD2 Real GDP The economy is at equilibrium at point A. What fiscal policy would be most appropriate to control demand-pull Inflation? Multiple Choice O Shift aggregate demand by increasing taxes. O Shift aggregate demand by decreasing taxes. O Shift aggregate supply by increasing taxes. O Shift aggregate demand by increasing government purchases.A contraction of the money supply Multiple Choice 6 points O increases the interest rate and decreases aggregate demand. eBook References O increases both the interest rate and aggregate demand. O lowers the interest rate and increases aggregate demand. O lowers both the interest rate and aggregate demand.8 A restrictive monetary policy is designed to shift the aggregate Multiple Choice 6 points O demand curve to the right. eBook References O demand curve to the left. O supply curve to the right. O supply curve to the left.Use the following graph to answer the next question. 9 AS 6 points AD3 Price Level eBook AD2 References Real GDP In the diagram, Y* is the full-employment output. A contractionary fiscal policy would be most appropriate if the economy's present aggregate demand curve were at Multiple Choice O ADO. O AD1. O AD2- O AD3-The Interest rate that banks charge one another for the loan of excess reserves Is the 10 Multiple Choice 6 points O prime rate. eBook References O federal funds rate. O discount rate. O interest on reserves." s u eBook D Refarences An expanslonary monetary policy Multiple Choice O O O O is u=ed when the inflation rate is high. is designed to reduce aggregate demand. can reduce the length of a recession. shifts the aggregate supply curve to the right. 12 G polnts =Book References Use the following graph to answer the next guestion. Price Level Real GDP The economy Is at equilibrium at point C, which 1s below potential cutput. What fiscal policy would Increase real GDP? Multiple Choice (IS C R ) ) Shift aggregate demand to the right by increasing taxes. Shift aggregate demand to the left by decreasing taxes. Shift aggregate demand to the left by decreasing government purchases. Shift aggregate demand to the right by increasing government purchases. 13 The purpose of a contractionary monetary policy is to Multiple Choice 6 points O alleviate recessions. eBook References O raise interest rates and restrict the availability of bank credit. O increase aggregate demand and GDP. O increase investment spending.14 The sale of government bonds by the Federal Reserve Banks to commercial banks will Multiple Choice 6 points O increase aggregate supply. eBook References O decrease aggregate supply. O increase aggregate demand. O decrease aggregate demand.An Increase In the reserve requirement 15 Multiple Choice pints O increases the money supply by increasing excess reserves and increasing the monetary eBook multiplier. References O decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier. O increases the money supply by decreasing excess reserves and decreasing the monetary multiplier. O decreases the money supply by increasing excess reserves and decreasing the monetary multiplier