32. In country X the monetary policy committee has cut the repo rate by 25 basis points. This will result in which one of the following? A. The TE will be constant with no movement upward or down. B. A downwards shift of the TE curve. C. An upwards shift of the TE curve. D. A movement along the equilibrium line downward from point A to B.
Added by Elizabeth B.
Close
Step 1
A cut in the repo rate reduces borrowing costs for banks, making it cheaper for them to lend money to businesses and consumers. Show more…
Show all steps
Your feedback will help us improve your experience
Crystal Wang and 98 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
11. Congress and the president raise income taxes while at the same time the Fed increases the money supply. The initial equilibrium in the money market, prior to any such policy change, occurs where the vertical money supply curve intersects the downward-sloping money demand curve. A possible impact of higher taxes is that it causes the (1) curve to shift (2). A possible impact of the expansionary monetary policy is that it causes the (3) curve to shift (4). (1) money demand money supply (2) to the left to the right (3) money demand money supply (4) to the right to the left 12. Contractionary policies are designed to slow the economy and reduce inflation by decreasing aggregate demand and aggregate output. Contractionary fiscal policy and contractionary monetary policy have opposite effects on the interest rate despite having the same goal of decreasing aggregate output because contractionary monetary policy (1) the interest rate, whereas contractionary fiscal policy (2) the demand for money and the interest rate. 1.) Using the line drawing tool, draw a new line on the graph that shows the effect of contractionary monetary policy. Properly label your line. 2.) Using the point drawing tool, plot and label the new equilibrium interest rate. Note: Carefully follow the instructions above and only draw the required objects. (1) increases decreases (2) decreases increases 13. On June 5, 2003, the European Central Bank acted to decrease the short-term interest rate by half a percentage point to 2 percent. The bank's president at the time, Willem Duisenberg, suggested that the bank could reduce rates further in the future. The likely impacts of such a rate cut were A. an increase in planned aggregate expenditure, an increase in consumption, and an ambiguous effect on aggregate income and output. B. a decrease in planned aggregate expenditure, an increase in consumption, and a decrease in aggregate income and output. C. an increase in planned aggregate expenditure, an increase in aggregate income and output, and an increase in consumption. D. an increase in planned aggregate expenditure, an increase in aggregate income and output, but an ambiguous effect on consumption.
Crystal W.
Suppose that the central bank reduces the repo rate. What will happen in the AD-AS model? (a) Investment decreases (b) Aggregate demand increases (c) Consumption increases (d) Income decreases (e) Prices increase a. Only b, c and e are correct. b. Only a, d and e are correct. c. All a, b, c, d and e are correct. d. Only a, b, c and d are correct. e. Only a and d are correct.
Hubert A.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD