dow jones industrial average falling 146 B u s i n e s s F i n a n c e
Please read Chapter 12 & 13 and answer the following DISCUSSION QUESTIONS (DQ’s), no double space and word count. No citation or other sources needed. DO NOT PLAGIARISM!!
1. Technical Questions 1 and 3 on Chapter 12 p. 388.
Q1. Determine whether each of the following changes has an impact on autonomous consumption expenditures or on induced consumption expenditures. Does it cause a movement along or a shift of a linear consumption function? a. An increase in personal income. b. An increase in stock market wealth.
Q3. Explain how the aggregate expenditure function shifts in response to changes in each of the following variables: a. The real interest rate increases. b. Consumer confidence decreases. c. Higher taxes are imposed on business profits. d. The economies of many countries in the rest of the world go into recessions.
2. Application Question 1 on Chapter 12 p. 389.
Q1. Use the aggregate expenditure model developed in this chapter to explain the following statements:
a. Coming amid continued turmoil in the financial and credit markets, the report sent stocks lower, with the Dow Jones Industrial Average falling 146.70 points Friday to close at 11,893.69.
b. Administration officials said they were confident conditions would improve as tax rebates that are part of the recent $152 billion economic stimulus package begin to reach consumers.
c. The Fed is expected to cut interest rates again to prop up the economy
3. Technical Question 3, on Chapter 13 p. 415.
Q3. If the reserve requirement (rr) is 0.2, what is the simple deposit multiplier? If, in addition, the currency deposit ratio (c) is 0.05 and the excess reserve ratio (e) is 0.15, what is the money multiplier? Explain why the money multiplier differs from the simple deposit multiplier.
4. Application Questions 1 and 5 on Chapter 13 p. 415.
Q1. In current business publications or on the Federal Reserve Website ( find the press release from the most recent meeting of the FOMC. What is the targeted federal funds rate? How does the FOMC evaluate the balance of risks between its goals of price stability and sustainable economic growth?
Q5. Building on Figures 13.5 and 13.6, show how equilibrium in the money market would change: a. If money demand is less sensitive to the interest rate or b. If there is a greater responsiveness of money demand to changes in income
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