Answer:
D. lowers the discount rate but not if it auctions more credit
Explanation:
Discount rate adjustment and Federal Reserve's auction have the following effects on reserves.
Discount rate adjustment: a <em>higher discount rate</em> will encourage investment in the US economy, thus leading to <em>increased reserves</em> as investment inflows increase.
On the other hand, a <em>lower discount rate</em> encourages investment outflow into other jurisdictions with higher yields, <em>thus reducing reserves</em>.
Auction: <em>auctioning more credit</em> will result in the movement of investment flows into the Federal Reserve (<em>an increase in reserves</em>) as investors invest in auctions. Vice versa.
Therefore, a mix of lower discount rate and not auctioning more credit will result in lower reserves.
Answer: decreases
Explanation: In simple words, complementary goods are those goods which have negative relation with each other in respect of price and demand. The usage of one good is dependent on other in case of complementary relation.
For example - Petrol and petrol car are complementary goods, if the price of petrol increases the demand for petrol cars will decrease.
Hence we can conclude that the right answer to the given problem is decrease.
Answer:
3.45%
Explanation:
the real wage at the beginning of the recession (12/07) = nominal wage / price index Dec. 2007 = $17.70 / 2.1141 = $8.3721
the real wage at the end of the recession (6/09) = nominal wage / price index June 2009 = $18.53 / 2.14527= $8.6609
% change in real wage = [($8.6609 - $8.3721) / $8.3721] x 100 = 3.44955% = 3.45%
Due to the recession, the price index changed less than the nominal wages since the inflation rate was very low. It is normal that during recessions, specially severe ones, the inflation rate decreases or even turns negative (what happened in Europe in those years).
Money. I'm doing the same subject right now. Feel free to message me if you have any questions.
