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What are some of the monetary policies put in place during the decade of the 1980s? Consider the discount rate set by the Fed, the rates on reserves, and open market operations.

What were the actions and impacts of these policies on businesses and individuals, including macroeconomic data and principles?

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Divya Singh
Divya SinghLv10
28 Sep 2019

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Related questions

In an effort to move the economy out of a recession, the federal government would engage in expansionary economic policies. Respond to the following points in your paper on the actions the government would take to address expansionary fiscal and monetary policies:

Expansionary Fiscal Policy:

Explain the actions the federal government would take while engaging in expansionary fiscal policy in terms of the following:

The necessary change in taxes and government spending,

The effect on aggregate demand, GDP, and employment.

Expansionary Monetary Policy:

The three tools the Federal Reserve Bank (The Fed) uses when conducting monetary policy are the required reserve ratio, the discount rate, and open market operations.

Explain the actions of the Fed in regard to the three tools.

When the required reserve ratio is increased or decreased

When the discount rate is increased or decreased

Buying or selling government securities when conducting expansionary monetary policy

Explain how these actions would affect the money supply, interest rates, spending, aggregate demand, GDP, and employment.

This is related to China's Economy from 2000-2012 What did the government do during this time to either help or hinder the improvement of the economy? Consider what policies were put in place by the government. This is where you will discuss fiscal policy, monetary policy, and supply side policy. What was the intended impact of these government policies? Note: government policies are not always effective, this is asking about the objective or goal of the government policies, not necessarily if these worked or not. What was the actual impact of the government policies? As objectively as possible, were there policies effective or not? Why?

Multiple Choice

1. Assume that the money multiplier equals 2.5 and if the Fed purchases $10 million in bonds from a bank, the monetary supply will:

  1. Increase by $10 million.
  2. Increase by $25 million.
  3. Decrease by $10 million.
  4. Decrease by $25 million.

2. The monetary base is defined as:

  1. all currency in circulation.
  2. checkable deposits at depository institutions.
  3. excess reserves in the banking system.
  4. currency plus total banking reserves.

3. Which of the following means of financing federal government spending will increase the monetary base?

  1. raising the corporate income tax.
  2. raising the personal income tax.
  3. selling bonds to the public.
  4. selling bonds to the Fed.

Short Answer

1. Assume the Federal Reserve Board is undertaking an expansionarymonetary policy. Explain the details of how the expansionary Fed impacts each of the following:

  1. Open market operations - how does the Fed use open market operations for an expansionary monetary policy?
  2. The monetary base.
  3. Money Supply.
  4. Fed funds interest rate.
  5. Long-term interest rates.
  6. Business Investment.
  7. Aggregate demand.
  8. Economic growth.
  9. Unemployment rate.

2. Under certain circumstances, expansionary Fed policy may not have much of an effect on the rate of economic growth. Give a reason why, and explain?

3. Regarding the Asian currency crisis, answer the following questions:

  1. Describe the normal reasons why a currency undergoes a significant depreciation and what were the important characteristics of the Asian countries involved in the crisis?
  2. What are some expected domestic economic consequences of the currency crisis for the countries involved? Focus on:
    • import prices of goods and services into the Asian country.
    • export prices of goods and services from the Asian country.
    • Domestic inflation rates.
  3. Assume that the countries involved undertake a tight monetary policy and raise interest rates in response to the crisis. What are the two primary reasons for raising interest rates in their case?
  4. Given high domestic interest rates, what is the economic outlook for these Asian countries in the next few years?

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