| Question | Explain what a $5 billion increase in bank reserves will do to real GDP under the following assumptions: a. Each $1 billion increase in bank reserves reduces the rate of interest by 0.5 percentage point. b. Each 1 percentage point decline in interest rates stimulates $30 billion worth of new investment. c. The expenditure multiplier is 2. d. The aggregate supply curve is so flat that prices do not rise noticeably when demand increases. |
|---|---|
| Subject | business-economics |
