Question

In: Economics

24. The Employment Act of 1946 established the original monetary policy mandate of the Fed. It...

24. The Employment Act of 1946 established the original monetary policy mandate of the Fed. It called for:
(a) balancing the federal budget deficit;
(b) elimination of frictional unemployment by 1950;
(c) setting conditions in the economy and financial system conducive to the achievement of full employment of workers and price stability;
(d) maximizing employment and financial market stability.

25. With respect to the Equation of Exchange, velocity can best be thought of as:
(a) the number of times an individual dollar bill is spent in an average month;
(b) the number of dollars of nominal GDP per dollar of money supply;
(c) how quickly new orders for business inventories can be filled;
(d) the ratio of money supply to inflation.

26. All other things remaining the same, the Equation of Exchange reminds us that an increase in money supply typically can be expected to show up as:
(a) an increase in inflation only;
(b) an increase in real GDP only;
(c) partially an increase in real GDP and partially an increase in the price level;
(d) a decline in current dollar GDP.

28. In forming inflation expectations for the U.S., many analysts look at:
(a) inflation in less developed countries, especially those without an independent central bank;
(b) real GDP growth over the 4-8 quarters just passed;
(c) the long-term pattern of changes in unit labor costs;
(d) performance of the stock market.

Solutions

Expert Solution

24.The Employment Act of 1946 established the original monetary policy mandate of the Fed. It called for:

(d) maximizing employment and financial market stability.

initial fed came up with full employement act, but failure of it led to employement act, in which it aimed at maximize employement and stabalize financial markets.

25. With respect to the Equation of Exchange, velocity can best be thought of as:

(b) the number of dollars of nominal GDP per dollar of money supply

In, Equation of Exchange:

V = P*T / M

Where, P*T = nominal gdp

M= ​the money supply, or average currency units incirculation in a year​.

and V = velocity of money.

26. All other things remaining the same, the Equation of Exchange reminds us that an increase in money supply typically can be expected to show up as:

(c) partially an increase in real GDP and partially an increase in the price level

Money supply increases inflation as people are spending moreso price level also increases.

Money supply increases nominal gdp, and real gdp takes into consideration inflation, hence real gdp also increases.

28. In forming inflation expectations for the U.S., many analysts look at:

(b) real GDP growth over the 4-8 quarters just passed

Real gdp includes inflation effect. The GDP growth rate compares one or two quarters of a country's GDP to the previous one or two quarter in order to measure how fast an economy is growing, hence to calculated expected inflation rate, real gdp is taken by analysts.


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