##### (Solution)-If "the" multiplier is 6, the income multiplier

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28. If "the" multiplier is 6, the income multiplier with respect to the money supply is 4, and the money multiplier is 5, then which of the following policies does notincrease income by \$50 billion dollars?a) increase government spending by \$3 billion and the money supply by \$8 billionb) Fed sale of \$2 billion bonds and increase government spending by \$15 billionc) Fed purchase of \$1 billion bonds and increase government spending by \$5 billion.d) Fed purchase of \$16 billion bonds and decrease government spending by \$5 billion.29. Suppose "the" multiplier is 4, the income multiplier with respect to the money supply is 2, the money multiplier is 6, and the government is obliged by an election promise to increase government spending by \$5 billion, but wants the level of income to grow by only \$8 billion to avoid inflation. What monetary policy is required to accomplish this?a) buy \$1b bonds b) sell \$1b bonds c) buy \$2b bonds d) sell \$2b bonds30. If the income multiplier with respect to the money supply is 3, "the" multiplier is 4 and the money multiplier is 5, then when the central bank buys two billion dollars of bonds on the open market, the income level should ultimately increase bya) \$6b b) \$8b c) \$10b d) \$30

Solution ID:10086436 | Question answered on 16-Oct-2016

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