Author Question: ________ regularly trade their own gain against others' lives. A) Corporations B) Governments ... (Read 159 times)

Zoey63294 · **on:** Jun 29, 2018

________ regularly trade their own gain against others' lives.

A) Corporations
B) Governments
C) Individual people
D) all of the above

Question 2

List and briefly explain the steps in how monetary policy affects real GDP in the AS/AD model using as your example the case when the Fed eases monetary policy to fight a recession.

What will be an ideal response?

jlaineee · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

There are several steps. Step one is a change in the federal funds rate. To fight a recession, the Fed lowers the federal funds rate. It does so by using open market operations to increase banks' reserves. With the increase in reserves, the quantity of money and bank loans increase. The increase in loans increases the supply of loanable funds, which then lowers the real interest rate. Next the fall in the real interest rate increases investment, net exports (though a fall in the exchange rate), and other interest sensitive parts of aggregate demand and thereby increases aggregate demand. Aggregate demand increases with a multiplied effect. The increase in aggregate demand raises the price level and increases real GDP.