Differentiate between expansionary and restrictive monetary policies.
What will be an ideal response?
An expansionary monetary policy is where the Federal Reserve attempts to expand the money supply to stimulate aggregate expenditures in order to increase employment and output. Buying securities, reducing the reserve ratio, lowering the discount rate, and reducing the interest rate on reserves are the appropriate directional changes that lead to an expanded money supply. A restrictive monetary policy is the opposite. It is where the Federal Reserve attempts to reduce the money supply to dampen spending and inflation. Selling securities, raising the reserve ratio, raising the discount rate, and increasing the interest rate on reserves are the appropriate changes leading to a reduced supply of money.
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Which of the following policies is a supply-side policy?
a. Reduction in taxes. b. Reduction in regulation. c. Reduction in resource prices. d. Subsidies to produce technological advances. e. All of these.
Which of the following is false?
a. A resource is anything that can be used to produce anything else we value. b. Resources are costly because they have alternative uses c. Losses mean resources are not being used efficiently. d. None of the above is false; all are true.