Decrease in the money supply shifts the money supply curve

Assignment Help Econometrics

Reference no: EM131070960

When the Fed sells bonds to the public, it increases the supply of bonds, thus shifting the supply curve B s to the right. The result is that the intersection of the supply and demand curves B s and B d occurs at a lower price and a higher equilibrium interest rate, and the interest rate rises. With the liquidity preference framework, the decrease in the money supply shifts the money supply curve M s to the left, and the equilibrium interest rate rises. The answer from bond supply and demand analysis is consistent with the answer from the liquidity preference framework.

Reference no: EM131070960

Questions Cloud

Represent a range of reactions : 1. Would you describe yourself as multiracial, or do you see yourself as belonging to a single race? Why? 2. Have you or any member of your family ever encountered a glass ceiling? Explain. 3. As you read the following scenarios that represent a ran..

Xplain the overall financial objective of the business : BSBFIM501 Manage budgets and financial plans. You have determined that you will need to access budget information to explain to your team. You will explain the overall financial objective of the business, provide an overview of the budget and expla..

How would each affect expected profits and risk : What it mean to adopt a maturity matching approach to financing, assets, including current assets? How would a more aggressive or a more conservative approach differ from the maturity matching approach and how would each affect expected profits and r..

Shareholders turned employees close the company : You have accepted an offer at a CPA firm. After a week of training on the firms various procedures, systems and software you are finally ready to get to work. As you settle in to your desk you open up your task management software and email and be..

Decrease in the money supply shifts the money supply curve : The answer from bond supply and demand analysis is consistent with the answer from the liquidity preference framework.

Preference for either dividends or capital gains : A speaker at a recent tax seminar you attended made these comments: "In 2003, the tax law was revised so that dividend income is taxed at the same rate as capital gains. Thus, tax-paying investors no longer have a preference for either dividends or c..

Capitation payments to sickness funds : Why was cream skimming popular among the sickness insurance funds in Germany before the payment reforms in 2009? Capitation payments to sickness funds were uniform across the population. Capitation payments to sickness funds had inadequate risk adjus..

Patterns of customers for marketing purposes : Data mining is a common practice used to help identify buying patterns of customers for marketing purposes. More recently, though, some companies have started gathering non-purchasing information in order to create profiles of people to sell to re..

What level of pretax cost savings-project to be profitable : A proposed cost-saving device has an installed cost of $648,000. The device will be used in a five-year project but is classified as three-year MACRS (MACRS Table) property for tax purposes. What level of pretax cost savings do we require for this pr..

User Account

All Pages