Question
In: Economics
Q.4 As a response to current crisis, the US federal reserve has cut the interest rates....
Q.4
As a response to current crisis, the US federal
reserve has cut the interest rates. Now what will happen to the
level of domestic output as foreign interest rates fallen. Assume
that the home country has the flexible exchange rate system and
perfect capital mobility? Explain your answer with the help of an
IS-LM diagram.
Comment: Fiscal policy is more effective in increasing output, when
prices and wages are variable as compared to when (i) Prices and
wages are fixed, (ii) Prices are variable but wages are fixed.
(Show using the diagram)
The domestic country is US in fact.
Solutions
Rahul Sunny answered 7 months agoRelated Solutions
1*The Federal Reserve reduced interest rates as a response to the economic difficulties created by the...
1*The Federal Reserve reduced interest rates as a response to
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Explain how and why this should impact bond yields and prices.
Explain how this could be offset by changes in bond ratings.
The Federal Reserve recently announced that it will keep US interest rates low for a longer...
The Federal Reserve recently announced
that it will keep US interest rates low for a longer period of time
than previously announced. Using interest arbitrage, explain the
effect that this announcement is likely to have on spot and forward
exchange rates.
The Federal Reserve recently announced that it will keep US interest rates low for a longer...
The Federal Reserve recently announced
that it will keep US interest rates low for a longer period of time
than previously announced. Using interest arbitrage, explain the
effect that this announcement is likely to have on spot and forward
exchange rates.
As a response to the economic slowdown following the financial crisis, the Fed cut the Federal...
As a response to the economic slowdown following the financial
crisis, the Fed cut the Federal funds rate to near 0 by the end of
2008, and tried to provide further monetary stimulus through
“unconventional” policies. In a short paragraph, describe some of
these unconventional tools that were used by the Fed during this
period, and explain how these tools could increase demand even when
the Fed funds rate stays constant at zero.
Suppose that US Federal Reserve implements a contractionary monetary policy that leads to higher interest rates...
Suppose that US Federal Reserve implements a contractionary
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exchange rate?
The Federal Reserve has recently started to adjust interest rates higher after maintaining lower rates in...
The Federal Reserve has recently started to adjust interest
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The Federal Reserve has recently started to adjust interest rates higher after maintaining lower rates in...
The Federal Reserve has recently started to adjust interest
rates higher after maintaining lower rates in response to the 2008
recession. What is the economic significance of this change? What
will the impact be on the business environment?
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The Federal Reserve has pushed short-term interest rates down to
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matter whether the economy is at the full employment level or
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