Question 1

Explain how expansionary and contractionary monetary policies affect aggregate demand through the exchange rate channel.

Accepted Answer

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Question 2

Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy.Which of the following is not one of these lessons?

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Question 3

Discuss three channels by which monetary policy affects stock prices and aggregate spending.

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Question 4

Recent Japanese experience has been characterized by tight monetary policy,as indicated by

Accepted Answer

Tight monetary policy has led to falling asset prices in Japan. This has been a result of the Bank of Japan's efforts to maintain low inflation by keeping interest rates low, which has made borrowing and spending more expensive. As a result, investors have pulled their money out of the stock market and other asset classes, causing prices to fall. Falling asset prices can also have a negative impact on consumer confidence and spending, further slowing economic growth.

Question 5

In the late 1990s and early 2000s,the Japanese economy has experienced

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Question 6

Explain the traditional interest-rate channel for expansionary monetary policy.Explain how a tight monetary policy affects the economy through this channel.

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Question 7

The subprime financial crisis caused a recession because of the ________ in adverse selection and moral hazard problems and the ________ in housing prices.

Accepted Answer

The subprime financial crisis caused an increase in adverse selection and moral hazard problems in the housing market, as lenders made risky loans to borrowers who were more likely to default. This led to a decrease in housing prices as foreclosures and defaults increased, which in turn affected the overall economy and caused a recession. Therefore, both the adverse selection and moral hazard problems and the decrease in housing prices played a role in causing the recession.

Question 8

Analysis of the transmission mechanisms of monetary policy provides four basic lessons for a central bank's conduct of monetary policy.These lessons include:

Accepted Answer