Purchase Solution

IS curve shifts and the Federal Reserve

Not what you're looking for?

Ask Custom Question

1. The Federal Reserve System regulates the money supply primarily by:

controlling the production of coins at the United States mint.

altering the reserve requirements of commercial banks and thereby the ability of banks to make loans.

altering the reserves of commercial banks, largely through sales and purchases of government bonds.

restricting the issuance of Federal Reserve Notes because paper money is the largest portion of the money supply.

2. An increase in the marginal propensity to ____will decrease the size of the expenditure multiplier (?) and therefore the IS-curve will shift to the ____ and become steeper. If people save more and spend less, firms will experience an increase in unintended inventories. Firms will respond by decreasing production and national income will ____

save, left, decrease.
consume, right, increase.
save, left, increase.
consume, left, decrease
save, right, decrease

3. Assume a profit maximizing firm's short-run cost is TC = 700 + 60Q. If its demand curve is P = 300 - 15Q, what should it do in the short run?

shut down
continue operating in the short run even though it is losing money
continue operating because it is earning an economic profit
Cannot be determined from the above information.

Purchase this Solution
Solution Summary

Multiple choice questions related to IS curve shifts and the regulation of the money supply.

Solution Preview

1. The Federal Reserve System regulates the money supply primarily by:

altering the reserves of commercial banks, largely through sales and purchases of government bonds.

Open market operations is the Fed's primary ...

Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts

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

Economics, Basic Concepts, Demand-Supply-Equilibrium

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

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

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

Basics of Economics

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

View More Free Quizzes
Related BrainMass Solutions

  • Federal Reserve and the Sale of Bonds

    This effectively shifts the AD curve backward. See the attached file. Prices and real GDP decline. Because investment is very sensitive to interest rates, in the long run we would see an even greater leftward shift in the AD curve.

  • Monetary Policy and Money Creation in the United States

    On the contrary, an increase in T shifts the expenditure function down and for a given interest rate, i, the IS curve shifts to the left and there is a decrease in the equilibrium income.

  • Federal Reserve Policies

    This effectively shifts the AD curve forward. See the attached file. Prices and real GDP increase. Because investment is very sensitive to interest rates, in the long run we would see an even greater outward shift in the AD curve.

  • Effects of Changes in Nominal Money Supply and Price Levels

    An increase in government purchases shifts the IS curve and affects aggregate demand. An increase in price affects the real money supply and shifts the LM curve. Aggregate quantity of output demanded also changes.

  • equilibrium GDP

    When there's a decline in money demand, the Md curve shifts back to the left and put a downward pressure to the interest rate.

  • Monetary Policy as a Tool for Regulating the Economy

    This problem set defines the purpose of money and directly outlines how IS/LM curves are affected by changes in the money supply by the Federal Reserve.

  • effects on the equilibrium levels of aggregate output

    The IS curve shifts outward from IS0 to IS1 in response to the fiscal policy, while the LM curve shifts inward from LM0 to LM1 as a response to the monetary policy. The effect on interest rates is clear, since both movements cause it to increase.

  • money supply and demand curves

    b) On a separate graph, show that the interest rate can rise even if the Federal Reserve expands the money supply as long as it does so more slowly than demand is increasing. 2.

  • Goals of US monetary policy and their consistency

    Then a decrease in price value will not shift the unemployment, and the two goals can be both achieved. To approach full employment the US monetary authorization, or the Federal Reserve have to increase money supply to incentive consumption.

View More Related Solutions