Purchase Solution

Contractionary monetary policy

Not what you're looking for?

Ask Custom Question

Please see the attached file.

Purchase this Solution

Solution Summary

Assistance with pros and cons of the deficit and other short answer questions.

Solution Preview

The questions which you marked were done correctly. Here are explanations for the others. Let me know if you need any further assistance and thank you for using BrainMass.

1. Which of the following is true about Keynesian policies views?
c. Keynesian economists believe that a small amount of inflation may be good for the economy, and they do not advocate pushing inflation to zero if it means that a significant amount of unemployment will result.

Keynesians believe that changes in aggregate spending have an immediate, short term effect on output rather than on prices. Because prices are rigid, monetary policy is not an effective means of stimulating the economy.

2. Contractionary monetary policy may not be advantageous for which of the following reasons?
a. The trade deficit may increase.

A contractionary monetary policy shock leads to an appreciation in the US which would cause an increase in the trade deficit. Many of these answers are things that will happen under contractionary policy, but they are not undesirable.

3. You have been hired as an economic adviser to a large bank. What buy or sell recommendations for the US dollar in response to the following news: (2 points)
a. Expectations of higher interest rates in the US
Higher expected rates of return in the US will cause currency appreciation. Buy.
b. US interest rates rise, but less than expected
Less than expected increases will cause currency depreciation. Sell
c. Expected loosening of US monetary policy
A larger money supply leads to lower interest rates. This will cause currency depreciation. Sell.
d. Higher ...

Purchase this Solution


Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.