Week 3 Discussion Questions

Week 3 Discussion Questions
ECO/372 Principles of Macroeconomics


Discussion Questions
What are the uses of funds?
coin is used to purchase goods, services, and profits off debt. Money serves as a medium of exchange, as a stick in of value, and as a unit of account.
How do the federal and commercial-grade banks create money? The banks create money by bestow money to people with affair. Every time a loan is made by a bank interest is aerated on that loan, thus creating money. Banks are just like opposite businesses. Their product just happens to be money. Other businesses sell widgets or services; banks sell money -- in the form of loans, certificates of cohere (CDs) and other financial products. They make money on the interest they charge on loans because that interest is higher than the interest they pay on depositors accounts.
What is the difference between contractionary and expansionary monetary policy?
The civilise of a contractionary policy is to reduce the tag on of money to the parsimony and thus curb inflation while expansionary policy aims to accession the supply of money and thus stimulate economic activity.

What happens to the money supply, the interest rates and the economy as a whole, when the national Reserve sells bonds, what happens when the Federal Reserve buys bonds?





When the government sells bonds it decreases the money supply and increases the interest rates. The Economy as a whole is alter when the government sells these bonds because it forces Americans not to spend. When the government buys bonds Interest rates impart decline because supply of money has without delay increased. Since money is now cheaper people are willing to spend more, this will backsheesh to increased demand for goods which should in turn increase output. outgrowth output will require more employment to render for the extra production. Since more is being demanded then the price take will increase. This is also known as Inflation.
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