Explain what a $5 billion increase in bank reserves will do to real GDP under the following
Question:
a. Each $1 billion increase in bank reserves reduces the rate of interest by 0.5 percentage point.
b. Each 1 percentage point decline in interest rates stimulates $30 billion worth of new investment.
c. The expenditure multiplier is 2.
d. The aggregate supply curve is so flat that prices do not rise noticeably when demand increases.
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a A 5 billion increase in the bank reserves lowers interest ra...View the full answer
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Related Book For
Macroeconomics Principles And Policy
ISBN: 9780324586213
11th Edition
Authors: William J. Baumol, Alan S. Blinder
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