User Account

All Pages

Effect of the market for short-term treasuries

Assignment Help Macroeconomics
Reference no: EM132600978

Imagine that the central bank decides to buy short-term treasury bonds. (Technically these would be notes but they are just like bonds except shorter.)

a. Show the effect of this in the market for short-term treasuries. What happens to the price? (Assume this has no effect on the expected inflation rate.)

b. Show the effect of this in the market for loanable funds. What happens to the interest rate? (Keep in mind that we are talking about a short-term interest rate here.)

c. Recall that when the central bank does this, they buy the bonds with newly-created money, thus increasing the money supply. What effect would you expect this to have on the prices of long-term bonds and why? (You may want to review the "Fisher effect" from chapter 12. You may assume that these purchases are not expected by the market.)

Reference no: EM132600978

Questions Cloud

Maintain a zero rate of inflation at full employment : What kind of monetary policy would be needed to maintain a zero rate of inflation at full employment?
Is eBay auction legally-binding contract : Is an eBay auction a legally-binding contract? Consider whether a bid placed in an online auction on eBay is legally binding and, therefore, enforceable.
Determine consolidated sales : Determine consolidated sales, consolidated cost of goods sold, and consolidated 2010 income. Determine the non controlling interest expense for 2010
Determine the amount of Lincolns work opportunity credit : Each employee works in excess of 600 hours and is paid wages of $8,350 during the year. Determine the amount of Lincoln's work opportunity credit
Effect of the market for short-term treasuries : Imagine that the central bank decides to buy short-term treasury bonds. (Technically these would be notes but they are just like bonds except shorter.)
Calculate total long-term assets : The following information is taken from the records of Ginger Consulting - Accounts Payable $24,850 and Loans Payable $10,650. Calculate total long-term assets
Determine what is the amount of depreciation expense : Find What is the amount of depreciation expense that must be presented on the company's income statement for the year 2014?
What type of output gap is this economy in : Consider an economy where current output is $7,840, but long-run potential output is $8000. The current unemployment rate is 6%.
The plucknette article : The Plucknette article suggests that there are considerable differences between being a leader and being a manager.

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd