The federal reserve controls certain interest rates in the united states. investors often try to speculate as to whether the federal reserve will raise or lower rates and by how much. suppose a company conducts extensive interviews with financial analysts, and as a result, predicts that "thefed" will increase rates by an average of 0.25 percentage points every six months for the forseeable future. which type of equation could be used to model the predicted interest rates over the next several years, assuming no other significant changes? a) a linear equation b) a quadratic equation c) a polynomial equation d) an exponential equation
The First Question - The answer is B - Increased aggregate demand - An Increased Aggregate demand would indicate that more people are purchasing or wanting to purchase goods. An Increase in job satisfaction, while always nice, would not necessarily indicate a growing economy.
The answer is B
Explanation: Monetary policy is the instrument used by the apex bank in any country to regulate the economy. Example Federal Reserve, it includes the following monetary policy instruments
Open market operation :This involves the buying and selling of securities from and to commercial banks in order to increase or reduce the volume of money in circulation.in other words to mop up excess liquidity in the economy.
Bank rate: This is also known as discount rate, it is the rate of interest the central bank charges commercial banks and other financial institutions for discounting their bill.if the central bank want to reduce the lending powers of commercial bank and other financial institutions it will raise the discount rate which will force other rates to rise
Special deposit: This is an instruction from the central bank asking the commercial banks to keep with it special deposit over and above their statutory requirements.
Cash reserve or cash ratio: This is also known as liquidity ratio . In this case, the commercial banks are required by law to keep certain percentage of their total cash with the central bank.
Special directives: These are special instructions which the central bank gives to commercial banks as to which directions their lending policies should follow.
Moral suasion: This is based on moral grounds not with the use of force of law by the central bank on the kind of lending policy they should adopt regarding the expansion or contraction of money supply.
A) To cut the interest rate from 2% to 1.5%, the Federal Reserve needs to increase the money supply. The Open Market Committee will have to sell US Treasury security bonds in order to increase the money supply. This in turn will increase commercial bank's reserves, who in turn, will lower their interest rates in other to get rid of excess reserves.
B) Banks will lend more money because they now have excess reserves. It will increase the nation's money supply because banks create money when they make loans.
C) This will typically increase aggregate demand because a lower interest rate and cheaper loans result in a higher demand for financial securities. Firms will take more loans, they will use this loans for investments, and this investments will in turn increase production. Increased production means a higher supply of goods and services at a better price, and consumers will take advantage of it.
i found the koficent of the linear function and i foun c acordind to the strict formula y=kx+c and then i took 2 as an x and replacet it on the formula i found and then foun the y