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justinw2200 justinw2200
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4 years ago
Recall the Application about the reasons why interest rates rise during an economic recovery to answer the following question(s). Although higher interest rates are often associated with lower output, interest rates often start to rise when an economy recovers from a recession and when an economy grows quickly. As an example, in 2005, a year in which real GDP grew very rapidly, interest rates on 3-month Treasury bills rose from 2.3 percent at the beginning of the year to 3.9 percent by the end of the year.


According to this Application, one reason why interest rates rise during an economic recovery is

▸ the demand for money decreases, while the supply of money increases.

▸ the demand for money remains fixed, while the supply of money increases.

▸ the demand for money increases, while the supply of money remains fixed.

▸ the demand for money increases, while the supply of money increases.
Textbook 
Macroeconomics: Principles, Applications and Tools

Macroeconomics: Principles, Applications and Tools


Edition: 7th
Authors:
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JaxJax
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4 years ago
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wrote...
#2
4 years ago
Recall the Application about the reasons why interest rates rise during an economic recovery to answer the following question(s). Although higher interest rates are often associated with lower output, interest rates often start to rise when an economy recovers from a recession and when an economy grows quickly. As an example, in 2005, a year in which real GDP grew very rapidly, interest rates on 3-month Treasury bills rose from 2.3 percent at the beginning of the year to 3.9 percent by the end of the year.


Recall the Application. If, during an economic recovery, interest rates rose too fast and negatively impacted the recovery, what might the Fed do to reverse this impact?

▸ make an open market purchase

▸ increase the discount rate

▸ increase reserve requirements

▸ decrease the liquidity demand for money
wrote...
#3
4 years ago
make an open market purchase
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