Explain in detail what effect a Fed purchase of bonds will have on: (1 ) the LM curve; and (2 ) the IS curve
What will be an ideal response?
A Fed purchase of bonds will cause an increase in H and an increase in the money supply. This will cause an excess supply of money and the interest rate must decline to restore money market equilibrium. The LM curve will shift down as a result of this to reflect the now lower interest rate. The IS curve does not shift as a result of this. We would simply observe a movement along the IS curve.
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To be considered officially unemployed, a person must be at least 16 years old
A) and be a discouraged worker. B) and not working. C) and not in school and not working. D) and not working but is actively seeking employment.
The typical shape for a yield curve is
A) gently upward sloping. B) mound shaped. C) flat. D) bowl shaped.